U.K. CPI Rate Held Steady in June but Services Price Growth Rate Remains Elevated

As widely expected, UK annual inflation has decided to take a breather this summer, with the consumer price index (CPI) growth rate remaining unchanged at 2.0% year-on-year in June 2024, according to the latest figures from the Office for National Statistics.

Link to UK Consumer Price Inflation: June 2024

the main points:

1. The consumer price index including homeowners’ housing costs (CPIH) rose 2.8% year-on-year in the 12 months to June, also unchanged from May.
2. The rising costs of restaurants and hotels have contributed significantly to the rise in inflation, as hotel prices have been rising for more than a year.
3. This decline was offset by lower prices for clothing and footwear, which fell this year after rising in June. Fashion seems to be as fickle as ever.
4. Core inflation, which excludes energy, food, alcohol and tobacco (all the fun stuff), held steady at 3.5% for the CPI and 4.2% for the household CPI.
5. Food price inflation continued to ease, falling to 1.5% from 1.7% in May — its lowest rate since October 2021. Your wallet may finally stop crying in the produce aisle.

The Bank of England’s inflation target is 2%, so the latest figures show that inflation remains broadly within target.

but, Services inflation remains high at 5.7%which may be of concern to policymakers when making decisions about future interest rate moves.

Data suggests inflation pressures in the UK economy are stabilising after hitting multi-decade highs in 2022, but some underlying price increases have proven as stubborn as a British queue, likely supporting the idea that interest rate cuts may not come as the market wants, as the net bullish reaction in sterling below suggests:

GBP/USD: 15 minutes

After the initial rally, only the Japanese yen and the Swiss franc were able to turn things around, likely due to a broad shift in risk sentiment towards the negative during the Asian and London sessions, perhaps in reaction to comments from presidential candidate Donald Trump, who said that the US is still in a critical phase. The Federal Reserve warned against cutting interest rates until after the election.He pointed to possible higher tariffs in the future, reviving fears of a trade war.