Consumer prices in Britain rose by 7.9 per cent year-on-year in June. The rate of price growth slowed from 8.7 per cent in May and was the lowest in more than a year. This was announced today by the UK Statistics Authority. Analysts had expected inflation to slow to 8.2 percent, according to Reuters. That put June inflation further away from October’s 41-year high of 11.1 percent. However, it remains well above the Bank of England’s 2 percent target.
Core inflation
So-called core inflation, which excludes volatile food, energy, alcohol and tobacco prices, slowed to 6.9 per cent from May’s 7.1 per cent. The figure is closely watched by the central bank, which considers it a reliable indicator of underlying price pressures. Analysts had expected core inflation to remain at May’s level, which was the highest in more than 30 years.
Food prices rose 17.3 percent. That was down from May, when they rose 18.3 percent. High food prices thus remain a major financial burden for many households.
Raising the base interest rate
The Bank of England raised its base rate by half a percentage point to five per cent at the end of last month. By raising interest rates it is trying to slow down high inflation. The central bank’s Monetary Policy Committee raised the key interest rate for the thirteenth consecutive month in June, and the UK base rate is the highest since 2008, the height of the global financial crisis. Analysts expect further interest rate rises at the next meeting in early August.
The British economy, hit by the shock of Brexit but also by the covid-19 disease pandemic and the rise in gas prices in response to the Russian invasion of Ukraine, has so far this year avoided the widely expected recession. Unlike most other major rich economies, however, it has so far barely recovered to pre-pandemic levels.
The central bank forecasts that inflation will fall to just above five per cent by the end of this year. By early 2025, it is now expected to be below its two per cent target.
source: ČTK
