UK Inflation Cools to Lowest Level in Over a Year

According to official data revealed on Wednesday, inflation in the UK saw a more significant decrease than anticipated in June, dropping to the lowest yearly rate since March of last year.

In comparison to last year, consumer prices surged by 7.9% last month, a decrease from May's 8.7%, as reported by the Office for National Statistics (ONS). Experts had predicted a rise of 8.2%.

Core inflation, which provides a better indication of underlying price trends by excluding fluctuating food and energy expenses, was at 6.9%, a slight decrease from the 31-year high of 7.1% seen in May.

The inflation rate of food prices also saw a decrease, dropping to 17.3% from 18.3% in May. However, prices continued to rise compared to the previous year, though at a slower rate than in May.

These figures offer some respite for the Bank of England, which has been consistently increasing interest rates in every session since December 2021, bringing the benchmark rate to 5% last month.

Strong wage growth continues to be a critical risk factor for inflation prospects. The ONS indicated last week that average regular pay, not including bonuses, witnessed an increase of 7.3% during the quarter from March to May compared to last year, marking one of the highest growth rates since the establishment of records in 2001.

Economists generally concur that although the Bank of England will view the inflation decrease positively, it is unlikely to cause a significant shift in its hawkish policy position.