United Kingdom: Inflation stable in June despite higher oil prices

Consumer prices were unchanged in June over the previous month, down from May’s 0.4% rise. June’s reading was underpinned by higher prices for transport offsetting lower prices for food and non-alcoholic beverages, and clothing and footwear.

Inflation in June remained at 2.4% for the third consecutive month, slightly above the BoE’s 2.0% target but once more undershooting analysts’ expectations of a rise to 2.6%. Despite higher prices for imported oil, domestic inflationary pressures are muted, likely driven by limp wage growth. Meanwhile, annual average inflation dipped from 2.8% in May to 2.7% in June.

UK Inflation Forecast

Looking ahead, inflation will likely trend gradually downwards. The Bank of England downgraded its inflation forecasts in May’s Inflation Report, and now sees inflation dipping to 2.2% in Q4 2018 and 2.1% in Q4 2019, from 2.4% and 2.2% respectively in February’s Report. FocusEconomics Consensus Forecast panelists expect inflation to average 2.5% in 2018 and 2.1% in 2019.