United Kingdom Inflation June 2022

United Kingdom

United Kingdom: Inflation comes in at series high in June

July 20, 2022

Consumer prices rose 0.80% over the previous month in June, picking up from May's 0.65% rise. The reading was driven by rising price pressures for transportation.

Inflation ticked up to 9.4% in June, following May’s 9.1%. June's reading was the highest in the current inflation series, which began in 1997. Annual average inflation rose to 5.8% in June (May: 5.2%). Lastly, core inflation edged down to 5.8% in June, from May’s 5.9%.

Inflation is expected to stay well above the Bank of England’s 2.0% target in the coming quarters, due to higher energy and food prices, the weak pound, the rise in VAT on the hospitality sector from April, low unemployment and Brexit-related trade frictions. Moreover, Ofgem is likely to increase the energy price cap substantially from 1 October in response to elevated wholesale gas prices.

Giving their view on the inflation outlook, analysts at Goldman Sachs said:

“We think core inflation has peaked at 6.2%yoy in April and look for a gradual decline over the next few quarters, but we revised up our peak headline inflation forecast to 12.5%yoy in October. Our higher inflation projection is driven by a boost to our assumption for the Ofgem energy price cap increase in October to 54% (vs 42% previously), and we pencilled in a further 3.5% increase in January.[…] Beyond the near term, given the firm wage growth outlook, we continue to expect core inflation to remain notably above target throughout 2023.”

FocusEconomics Consensus Forecast panelists expect inflation to average 8.2% in 2022, which is up 0.7 percentage points from last month’s forecast, and 4.8% in 2023.


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United Kingdom Inflation Chart

United Kingdom Inflation June 2022

Note: Annual and monthly variation of consumer price index in %.
Source: Office for National Statistics (ONS) and FocusEconomics calculations.

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