United Kingdom Inflation July 2016

United Kingdom

United Kingdom: Inflation inches up in July

August 16, 2016

In July, consumer prices fell 0.1% over the previous month, which contrasted the 0.2% increase seen in June. The figure reflected lower prices for housing rents and also for some food items, especially meat products.

Inflation was 0.6% in July, which slightly exceeded the previous month’s 0.5% and the 0.5% expected by the markets. The reading marked the highest inflation since November 2014. Finally, annual average inflation remained at June’s 0.2% in July.

At its 4 August monetary policy meeting, the Bank of England (BoE), acting on disappointing data from July’s PMI and other high-frequency indicators released in the wake of the Brexit vote, lowered its policy rate 25 basis points to 0.25% and expanded its asset-purchasing program. The move will act as a safeguard for the economy and offset some of the negative effects of the Brexit vote. It will also put upward pressure on inflation. The BoE sees inflation averaging 1.3% in Q4 2016 and 2.1% in Q4 2017. FocusEconomics Consensus Forecast panelists expect inflation to average 0.7% in 2016, which is down 0.1 percentage points from last month’s forecast. For 2017, the panel forecasts that inflation will average 2.2%.

Author:, Senior Economist

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United Kingdom Inflation Chart

United Kingdom Inflation July 2016 2

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

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