2024-07-17 10:22:56
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Official national statistics released on Wednesday showed that UK inflation remained stable at the Bank of England’s 2% target in June.
Overall retail sales rose 1.9%, topping analysts’ expectations and matching May’s 2% gain, according to economists polled by Reuters.
Sterling rose slightly shortly following the data was released, trading at $1.2977 at 7:21 a.m. in London.
Services sector inflation – closely watched by the BoE due to its dominance in the UK economy and its reflection of domestic price increases – remained unchanged at 5.7% in June.
Core inflation, which excludes energy, food, alcohol and tobacco, was 3.5%, also unchanged from 3.5% in May.
The ONS said rising restaurant and hotel prices were the biggest contributor to upward price pressure, while clothing and footwear costs saw the biggest falls.
Consumer spending on leisure activities, including cultural experiences and concerts, increases during the summer as high-profile artists such as Taylor Swift, Bruce Springsteen, Pink and Sting tour the country.
Bank of England rate cut in focus
Investors had been eyeing a possible rate cut in August as headline inflation showed signs of continued easing, and expectations for a rate cut eased following the latest data.
Jane Foley, head of foreign exchange strategy at Rabobank, said the persistence of services sector inflation might trigger caution among Bank of England policymakers ahead of their meeting next month.
“Nothing is really settled in August,” she told CNBC’s “Squawk Box Europe” on Wednesday.
She added: “I think many members of the policy committee and many economists will be looking at services inflation and be a little concerned.”
Jonathan Haskell, member of the Bank of England’s Monetary Policy Committee last week Said he believes interest rates should remain unchanged due to continued pressures in the labor market.
Bank of England chief economist Hugh Peel added later this week that the timing of a rate cut remains a long way off. “Open-ended questions” Due to the “disturbing strength” of wage growth.
The Bank of England’s main interest rate has remained at its highest level in 16 years at 5.25% since August 2023, when inflation was 7.9%.
Wednesday’s house price data was the first published since the July 4 general election and did not reflect the change of government. Darren Jones, the new chief minister to the Treasury, said in a statement that house prices were still too high.
“We face a legacy of fourteen years of chaos and economic irresponsibility. That is why this government is taking the difficult decisions now to strengthen the foundations so that we can rebuild Britain and make life better for everyone in our country,” he said on Wednesday.
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