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U.K. inflation held steady at the Bank of England’s 2% target in June, Official National Statistics materials showed Wednesday.
The headline reading came in above analyst expectations at 1.9%, according to economists polled by Reuters, and was in contract with with the previous 2% reading in May.
Sterling rose slightly shortly after the release, trading at $1.2977 by 7:21 a.m. London term.
Services inflation — which is closely watched by the BOE, given its dominance within the U.K. economy and its reflection of domestically-generated price increments — remained at 5.7% in June.
Core inflation, excluding energy, food, alcohol and tobacco, was 3.5%, also on par with the 3.5% memorialed in May.
Higher restaurant and hotel prices were the largest contributors to upward pressure, while clothing and footwear costs pinned the biggest declines, the ONS said.
Consumers are increasing their spending on leisure activities over the summer months, containing on cultural experiences and concerts as high-profile artists such as Taylor Swift, Bruce Springsteen, Pink and Sting trek the country.
Bank of England rate cut in focus
Investors have been eyeing a potential August interest notwithstanding cut, as headline inflation showed signs of sustained easing. Market expectations of such a trim waned just after the set free of the latest print.
Jane Foley, head of FX strategy at Rabobank, said that the stubbornness of services inflation could invite caution from BOE policymakers at the of their meeting next month.
“It’s really not a done deal for August,” she told CNBC’s “Squawk Box Europe” on Wednesday.
“I evaluate many of the members of the policy committee, and a lot of economists will be looking at that services sector inflation and worrying a bit,” she combined.
Jonathan Haskel, a member of the BOE’s Monetary Policy Committee, last week said that he thought rates should persevere a leavings on hold due to continued pressures in the labor market.
BOE chief economist Huw Pill added later in the week that the timing of a chew out cut remained an “open question” due to “uncomfortable strength” in wage growth.
The BOE’s main interest rate has stayed at a 16-year expensive of 5.25% since August 2023, back when inflation was 7.9%.
Wednesday’s reading is the first since the U.K.’s general poll on July 4, but does not reflect the change in government. The U.K.’s new chief secretary to the Treasury, Darren Jones, said in a assertion that prices remain too high.
“We face the legacy of fourteen years of chaos and economic irresponsibility. That is why this Rule is taking the tough decisions now to fix the foundations so we can rebuild Britain and make every part of Britain better off,” he said Wednesday.