Britain’s Inflation Report
In June, inflation in Britain remained stable as the Bank of England edges closer to its first interest rate cut in years. Economists are analyzing the possible influence of a global pop star on maintaining higher services prices.
The Office for National Statistics reported a 2 percent year-on-year increase in consumer prices, matching the rate from May and aligning with the central bank’s target. The rise in prices was attributed to lower clothing costs but was balanced by a significant increase in hotel room prices. Food inflation also slowed down, with prices increasing by just 1.5 percent compared to the previous year.
Investors are closely monitoring the inflation report along with upcoming data on wage growth expected to be released on Thursday. There had been speculations of a 50 percent likelihood of a rate cut by the central bank at its early August meeting. However, the June inflation figures slightly exceeded expectations.
Core inflation, excluding energy and food prices, was anticipated to decrease but remained at 3.5 percent in June. As a result, traders adjusted their predictions for an August rate cut to around a 35 percent probability.
Despite economists’ projections of a decline, inflation in the services sector, encompassing areas like hospitality, remained steady at 5.7 percent in June. Wage expenses play a significant role in services inflation, making it challenging to reduce prices once these costs begin to rise.
The surge in hotel prices in June, rising by almost 9 percent from the previous month, coincided with the presence of Taylor Swift’s Eras Tour in Britain. The tour has emerged as a notable economic event, potentially impacting inflation. Taylor Swift performed ten shows in Britain in June and is set to return in August.
