UK inflation holds steady in June, giving BoE pause for thought

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Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) rate of inflation held steady at 2.4% in June, unchanged from a month earlier.

Faster rising prices would have given the Bank of England (BoE) more of a motivation to increase interest rates next month, but today's inflation data combined with yesterday's lacklustre wage growth figures could force policymakers into a rethink.

Without the increased price of fuel, the UK's headline rate of inflation would likely have dropped last month, the ONS said, continuing a steady decline witnessed throughout 2018.

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.

British workers´ pay growth has slowed to its weakest in six months despite record employment, challenging the Bank of England as it considers whether to raise interest rates next month for only the second time since the financial crisis.

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Bank Governor Mark Carney earlier this month said that a revision in the first quarter growth rate from 0.1% to 0.2% gave him "greater confidence" that softer United Kingdom activity in the first three months of the year was "largely due to the weather, not the economic climate".

Tom Stevenson, investment director for personal investing at Fidelity International, said it looks odds-on that the BoE will hold fire yet again on a rate rise.

Inflation unexpectedly stalled last month as higher prices for motor fuel, gas and electricity were offset by deeper discounting by clothing retailers.

This was the highest input price inflation since May 2017, driven by higher crude oil costs, despite falling on the month. Prices in London alone house prices dropped by 0.4 percent on the year.

That increase was due to higher prices for clothing and recreational goods.

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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 a year ago.

The latest inflation figures come just 24 hours after the ONS showed United Kingdom employment hitting its highest level ever and wages continuing to rise steadily. "August's expected rate hike is, therefore, even less of a dead cert than it was".

Wholesale inflation rate, which is measured by the wholesale price index (WPI), is an indicator of price movements and largely mirrors trends in shop-end prices.

Inflation holds steady at 2.4% in the United Kingdom in June, according to fresh data from the Office for National Statistics. While inflation in vegetable prices more than tripled in pace from May's 2.51% to 8.12% in June, the annual gains in potato prices have been in a steep upward spiral for five straight months and exceeded 99% in June.

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