United Kingdom: Inflation moves into double figures in July
Consumer prices rose 0.61% in July over the previous month, slowing down from the 0.80% increase recorded in June. Looking at the details of the release, prices for recreation and culture rose at a faster pace in July. However, prices for transportation increased at a more moderate rate. Meanwhile, housing and utilities prices grew at a quicker pace.
Despite the month-on-month moderation, annual inflation rose to 10.1% in July, following June’s 9.4%. July’s figure represented the highest inflation rate since the early 1980s, and was above market expectations. Annual average inflation rose to 6.5% in July (June: 5.8%). Finally, core inflation rose to 6.2% in July, from June’s 5.8%.
July’s inflation reading is likely to spur the Central Bank into another aggressive rate hike at its September meeting. Inflation is expected to rise further from its current level by year-end, due to a tight labor market and the re-rating of Ofgem’s energy price cap from October—recent reports suggest the cap could rise by as much as 75% from its current level.