Inflation in the UK rises weaker than expected
Inflation in the UK is on the rise again following the interest rate cut by the Bank of England. Consumer prices increased by 2.2 percent year-on-year in July, up from 2.0 percent in June, according to data from the statistics office on Wednesday. Economists polled by news agency Reuters had expected a slightly larger increase of 2.3 percent.
The central bank in London had cut the key interest rate by a quarter point to 5.0 percent at the beginning of the month. This was the first easing since the spring of 2020. The fresh inflation figures ahead of the next meeting in September will have particular significance for the further monetary policy course. Although the Bank of England (BoE) is still close to its inflation target of two percent despite the renewed price increases, it may be concerned about the still strong price momentum in the services sector: In July, services became 5.2 percent more expensive, albeit not as strongly as in June with 5.7 percent. This is the lowest inflation rate in this dominant economic sector on the island for more than two years. Economists polled by news agency Reuters had only expected a decline to 5.5 percent.
The Bank of England's decision to lower the key interest rate in the United Kingdom could potentially impact future monetary policies, considering the recent increase in inflation within the country. Despite The United Kingdom's inflation still being relatively close to the Bank of England's target of 2%, the ongoing strong price momentum in the services sector might raise some concerns.
