Britain’s inflation unexpectedly jumps in June

Britain’s annualized inflation unexpectedly rose to its highest in over a year at 3.6% in June, potentially making it a tougher call for the Bank of England to cut interest rates next month.
June’s reading took the annual CPI rate to its highest since January 2024, against expectations to remain unchanged at 3.4%.

Services price inflation, a measure the BoE views as a better guide to domestically generated price pressures than the headline CPI rate, held at 4.7% in June, in contrast to economists’ forecasts for it to fall to 4.6%.
Higher costs for motor fuels, air and rail fares were the biggest contributor to the rise in the inflation rate between May and June, along with increase in the cost of clothing and shoes.

British inflation has risen steadily since touching a three-year low of 1.7% last September, and in May the Bank of England forecast it would peak at 3.7% in September – almost twice the central bank’s 2% target.

Previously, April brought a particularly sharp jump in inflation to 3.5% from 2.6% due to rises in regulated energy and water tariffs, a spike in air fares, and upward pressure on the cost of labor-intensive services from a rise in employment taxes and the minimum wage.

Despite this, Governor Andrew Bailey has said interest rates are likely to remain on a gradual downward path, as a weaker labor market puts downward pressure on wage growth and the outlook for economic growth remains lackluster.
The BoE has cut interest rates by four quarter-point steps since August and economists polled by Reuters last month forecast two more quarter-point rate cuts this year, including a likely move in August.