In June, British inflation came in lower than expected, reaching its slowest rate in over a year at 7.9%, according to official data. This should alleviate some of the pressure on the Bank of England to continue aggressively raising interest rates.
The Office for National Statistics reported that consumer price inflation growth was the lowest since March of the previous year, but it still remained higher than the price growth in many other major economies. Economists surveyed by Reuters had predicted a drop in the CPI rate for the 12 months up to June, forecasting it to reach 8.2% from the previous month's 8.7%. Although it moved further away from the 41-year high of 11.1% recorded in October, it still significantly exceeded the Bank of England's target of 2%.
The Bank of England had previously anticipated the inflation rate in June to be at 7.9%. Additionally, core inflation, which excludes food, energy, alcohol, and tobacco prices and is closely monitored by the Bank of England, also declined more than expected, coming in at 6.9% compared to May's 7.1%, making it the highest rate in over 30 years.
Economists surveyed by Reuters had predicted that the core measure of price growth would remain at 7.1%. While food price inflation decreased to 17.3% in June from 18.3% in May, it still poses a significant burden on the finances of many households.
The Bank of England is expected to raise interest rates for the 14th consecutive time on August 3rd, after having already increased the base rate to 5% in May from 0.1% in December 2021. Earlier in the year, Prime Minister Rishi Sunak had pledged to halve inflation by the end of 2023, ahead of an expected national election in 2024, but this target has been described as challenging by Finance Minister Jeremy Hunt.
The opposition Labour Party, currently enjoying favorable opinion poll results, has criticized Sunak's Conservative Party, blaming them for a "mortgage catastrophe" as homeowners grapple with rising borrowing costs.