Inflation in the UK fell more than expected in June, signaling that the effects of interest rate hikes are starting to be seen.
Inflation fell to 7.9 percent from 8.7 percent on an annual basis in June, according to data from the UK’s Office for National Statistics.
The median estimate of economists surveyed by Bloomberg was 8.2 percent. Inflation thus fell to its lowest level since March 2022.
Monthly inflation increased by 0.1 percent, against the expectations of 0.4 percent. The previous month, the increase was 0.7 percent.
Core inflation fell to 6.9 percent from its 31-year peak of 7.1 percent, while services inflation fell from 7.4 percent to 7.2 percent.
The Bank of England (BOE) increased interest rates for the 13th time last month to reduce inflation. The bank is expected to raise the policy rate to 5.5 percent by increasing the interest rate by 50 basis points at its August meeting.
British Finance Minister Jeremy Hunt said in a statement after the data that inflation is declining. It’s the lowest level since March last year. However, we are still not at a satisfactory level and we know that price increases are still a major concern for families and companies.”
Futures First Canada Analyst Rishi Mishra stated that the announced figures are satisfactory for the BOE and said, “Core inflation is still high, but the trend is in the right direction. The final interest rate expectation in the markets may decline from 6.25% to 5.75%.