UK inflation holds steady at 2%

(Sharecast News) - UK inflation was unchanged in June, official data showed on Wednesday, in line with the Bank of England's target.

According to the Office for National Statistics, the consumer price index grew by 2% in the year to June, broadly in line with expectations.

The ONS said that restaurant and hotel prices, which rose "strongly", were the largest upward contributor. Second-hand car costs fell, but by less than this time last year.

However, that was offset by widespread sales pushing down clothing and footwear prices.

Core CPI, which excludes the more volatile elements of energy, food, alcohol and tobacco, rose by 3.5% in the 12 months to June, also unchanged on May.

The consumer prices index including occupiers' housing costs (CPIPH) also held steady compared to May, rising by 2.8%. Core CPIH was 4.2%.

The Bank of England is widely expected to cut rates, which currently stand at a 16-year high of 5.25%, later this summer.

However, while CPI remains at 2%, the BoE's long-term inflation target, the Monetary Policy Committee has flagged concerns about the level of core CPI.

Services sector CPI also remains high, unchanged at 5.7% in June, although further falls in food prices helped offset that partially.

Food and non-alcoholic beverages rose by 1.5% in the year to June, down from 1.7% in May and the lowest annual rate since October 2021, when it was 1.3%. A year ago, it was 17.4%.

Factory gate prices, meanwhile, were up 1.4%, down on May's 1.7% rise. The cost of raw materials fell by 0.4%, compared to a revised fall of 0.7% last month.

Martin Sartorius, principal economist at the CBI, said: "Today's data paves the way for an interest rate cut next month, which would begin to provide some relief for firms and households.

"Going forward the MPC will be mindful of potential upside risks to inflation in the near-term, as the domestic growth outlook improves."