Year-on-year growth rate of consumer prices in Britain slowed to 6.8 percent in July from 7.9 percent in June. The annual growth rate of consumer prices in Britain slowed to 6.8 percent in July from 7.9 percent in June. Inflation was thus the lowest since last February. This was mainly due to lower gas and electricity prices. This was reported today by the British statistical office ONS. Inflation thus moved away from October’s 41-year record of 11.1 percent, but is still well above the Bank of England’s two percent target.
The figure is in line with the expectations of analysts polled by Reuters and with the estimate of the British central bank. Despite the decline, British inflation is one of the highest in Western Europe. Only Iceland and Austria recorded higher inflation in July.
Core inflation was the same as in the previous month at 6.9 percent. Analysts had expected a slight slowdown to 6.8 percent. Core inflation does not include volatile food and energy prices and is closely monitored by the central bank, which considers this figure to be a reliable indicator of underlying price pressures.
A tough comeback
The Bank of England raised the key interest rate by a quarter of a percentage point to 5.25 percent earlier this month. By raising interest rates, they are trying to slow down high inflation. The central bank’s monetary policy committee has raised key interest rates for the 14th time in a row, and Britain’s key rate is at its highest since 2008, the height of the global financial crisis.
The British economy, which was hit by the shock of Brexit, but also by the covid-19 pandemic and the increase in gas prices in response to the Russian invasion of Ukraine, has so far avoided the widely expected recession this year. However, unlike most other large rich economies, it is still barely reaching pre-pandemic levels.
At the beginning of the month, the central bank predicted that inflation would slow down to 4.9 percent by the end of this year. However, inflation is not expected to return to the two percent target until the second quarter of 2025, i.e. three months later than the bank predicted in May.