United Kingdom: Inflation rises in July, although uptick could be short-lived
Consumer prices were flat month-on-month in July, matching June’s reading, as lower prices for clothing and footwear offset higher prices for recreation and culture.
Inflation increased from 2.0% in June to 2.1% in July, slightly above the Bank of England’s (BoE) 2.0% target and confounding market expectations of a fall to 1.9%. Core inflation—which excludes food and energy costs—rose from 1.8% to 1.9%.
Looking ahead, recent sterling weakness coupled with higher wages could add upward pressure to prices in the coming months. However, our panelists still see inflation averaging slightly below target in Q3 and Q4, partly on low energy prices. Inflation is unlikely to become a concern for the Bank of England, and any changes to the policy stance will continue to hinge on the outcome of Brexit.