As widely expected, the UK’s annual inflation decided to take it easy this summer, with the consumer prices index growth rate remaining unchanged at 2.0% y/y in June 2024, according to the latest figures released by the Office for National Statistics (ONS).
Link to the ONS Consumer price inflation, UK: June 2024
Key points:
- The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 2.8% y/y in the 12 months to June, also unchanged from May.
- Rising costs for restaurants and hotels made the largest upward contribution to inflation, with hotel prices increasing more than a year ago.
- This was offset by falling clothing and footwear prices, which decreased this year after rising last June. Fashion, it seems, is as fickle as ever.
- Core inflation, which excludes energy, food, alcohol and tobacco (all the fun stuff), held steady at 3.5% for CPI and 4.2% for CPIH.
- Food inflation continued to ease, falling to 1.5% from 1.7% in May – its lowest rate since October 2021. Your wallet might finally stop weeping in the produce aisle.
The Bank of England’s inflation target is 2%, so the latest figures show inflation remains on target overall.
However, services inflation remains elevated at 5.7%, which may concern policymakers as they decide on future interest rate moves.
The data indicates inflation pressures in the U.K. economy are stabilizing after reaching multi-decade highs in 2022, but some underlying price increases are proving as stubborn as a British queue, likely supporting the idea that rate cuts may not come as the market wants, as signaled by the net bullish reaction in sterling below:
British pound vs. Major Currencies: 15-min
Overlay of GBP vs. Major Currencies 5-min Forex Chart by TradingView
After the initial burst higher, only the Japanese yen and Swiss franc were able to turn the tables, likely due to the broad shift in risk sentiment towards negative during the Asia and London session, possibly a reaction to comments from Presidential candidate Donald Trump, who warned the Fed to not cut rates until after the election, and signaled potentially higher tariffs ahead, bringing back trade war fears.
