United Kingdom interest rate rise in doubt as inflation stays at 2.4%

Galtero Lara
Julio 18, 2018

Inflation based on wholesale prices, which touched a 4-year high in June, seems to have peaked for this financial year, and is expected to glide down to around 4.1 per cent by March 2019, says a report.

The figure was a surprise as economists were predicting a lift to 2.6% because of higher oil costs - a scenario that would have bolstered expectations of a rise in interest rates by the Bank of England next month.

However, the summer sales weighed on inflation after clothing prices were cut, in particular on men's fashion.

Sterling - already weakened amid political turmoil over the government's Brexit blueprint - fell by 0.7% against the dollar to just above $1.30 as investors registered their disappointment with the core inflation number.

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Although the cost of gas and electricity prices increased and the price at the pump hit the highest level for almost four years, consumers benefited from the falling cost of computer games and the summer clothing sales.

The unchanged figure means that wages remain above inflation despite pay growth slowing to 2.7%.

The ONS said that the price of clothing and footwear fell by 2.3% between May and June compared to a 1.1% decline in the same period past year.

Ruth Gregory, senior United Kingdom economist at Capital Economics, said: "While the lower-than-expected rate of inflation in June means that a hike in interest rates in August is a little less clear cut, we nonetheless think that it remains more likely than not". There could, however, be rising inflation ahead as manufacturers raise their prices.

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