The latest inflation data for the UK has been released, and it appears that there is no cause for concern among the nine policymakers responsible for setting interest rates. The overall CPI inflation rate remains steady at 2%, which is in line with the target set by the Bank of England. Other measures of inflation, such as core and services inflation, which are closely monitored by the Monetary Policy Committee, have also remained unchanged.
The number of individuals claiming non-dom status has also risen, according to the latest data on money. However, it seems that the trend of double-digit inflation is starting to fade away, although many families across the country are still feeling the effects of higher prices compared to previous years.
Interestingly, the Bank of England had expected inflation to be slightly lower than the current rate. Their previous forecasts had indicated a hope for services inflation to decrease to 5.1% this month, but it remains at 5.7%. While there were speculations about a possible “Taylor Swift effect” on today’s numbers, with the singer’s concerts potentially driving up prices, this has proven to be a minor factor at best. Although hotel inflation did experience a 7% increase to 9.8%, the annual inflation rate for concerts, cinemas, and theatres actually dropped from 7.7% to 7.3% in June.
Despite this, the Bank cannot overlook the higher-than-expected data. As a result, the implied probability of a rate cut at the August meeting has slightly decreased from 50% to 48% in financial markets. While a rate cut is still likely, it is now slightly less so following the release of these figures. The question of when the Bank will cut interest rates from the current 5.25% level remains uncertain, and all eyes will be on upcoming data on the labor market and the wider economy as the nine members of the MPC consider the possibility of a rate cut.
