There is nothing in the current inflation data that would cause panic to the nine policymakers who decide the UK’s interest rates.
The general CPI inflation rate remained stable at 2% – hit the Bank target. Core and services inflation – other price measures in the inflation “basket” that the Monetary Policy Committee focuses on – also remained unchanged.
Latest Money: Number of people claiming non-domiciled status rises
So, in a sense, the story is the same as last month: the era of double-digit inflation appears to be fading in the rearview mirror, even though the pain of higher prices (compared to a few years ago) is still being felt. by many families across the country.
But here’s the thing. The Bank of England expected inflation to be slightly lower than this. In particular, based on its latest forecasts, it expected this month’s services inflation to fall to 5.1%. Instead, it is still up 5.7%.
And while some economists have speculated about whether there could be a “Taylor Swift effect” in today’s numbers, with the singer’s concerts driving up prices, such an effect appears minor at best.
On the one hand, hotel inflation rose 7% to 9.8%. But, on the other hand, the annual inflation rate for concerts, cinemas and theaters fell from 7.7% to 7.3% in June.
Keep up with the latest news from the UK and around the world by following Sky News
Even so, these effects are not enough to make the Bank completely disregard this larger-than-expected set of data.
The result is that in financial markets, where investors are constantly taking positions on when the Bank will or will not change interest rates, the implied probability of a rate cut at the August meeting has fallen slightly – from around 50% to 48%.
In other words, while a cut is still quite likely, it is a little less likely following these numbers.
Therefore, the question of when the Bank will reduce funding costs from their current level of 5.25% is still in play. And all eyes will now be on upcoming data on the jobs market and the broader economy, as the Bank’s nine MPC members begin to consider whether to initiate cuts.
This story originally appeared on News.sky.com read the full story