Although it remained above the level recorded in other major economies, inflation in the UK fell, in June, more than expected, to its lowest value in more than a year.
According to data released this Wednesday by Britain’s Statistics Authority, the annual rate of inflation fell from 8.7% in May to 7.9%. This is a result that exceeds the expectations of analysts, who indicated in a Reuters poll that the average result was still just above 8%.
Similarly, for the annual core inflation rate (which removes energy and food prices from the analysis), despite expectations that the value would remain unchanged in June, what ended up being a drop of 7.1% to 6.9%.
With it now at 7.9%, the UK’s annual rate of inflation finally appears, after several months of remaining at very high levels, to want to start a more pronounced downtrend. The value recorded now is the lowest since March 2022 and is moving away from the peak of 11.1% reached last October.
The above-expected decline achieved in June may also lead to a change in the Bank of England’s behavior. At least that seems to be the general expectation in the markets. If what was expected until Wednesday was that the British Monetary Authority, at its next meeting, would make another 0.5 percentage point increase in interest rates, now the forecast is for a moderate increase of 0.25 percentage point.
Anyway, compared to the eurozone and the US, the UK still has a much higher level of inflation (the annual inflation rate in the eurozone was 5.5% in June and in the US it was 3%), which is not expected. To change very quickly. This is why it is expected that interest rates at the Bank of England, currently at 5%, could approach 6% over the next few months, as Governor Andrew Paley has expressed on several occasions his intention to continue to restrict monetary policy adopted. .
