UK Inflation Eases Unexpectedly To 3-Month Low
18 July 2017 - 6:02PM
RTTF2
UK inflation slowed to a three-month low and factory gate
inflation skid to its weakest level in six months in June, defying
calls for an immediate interest rate hike.
Consumer prices advanced 2.6 percent year-on-year in June,
following a 2.9 percent rise in May, data from the Office for
National Statistics showed Tuesday.
Inflation was expected to remain unchanged at a nearly four-year
high of 2.9 percent. Nonetheless, the figure was clearly above the
2 percent target. The latest slowing was driven by motor fuel and
recreation goods.
Core inflation that excludes energy, food, alcoholic beverages
and tobacco also slowed in June, to 2.4 percent from 2.6 percent a
month ago.
Even if inflation does recover, ING Bank economist James Smith
expects the weaker pound to ultimately keep headline inflation in
the 2.5-3 percent region for the rest of this year. The decision to
hike rates still hinges on the growth outlook, the economist
noted.
The BoE's next decision is widely expected to be 'hold' after
inflation eased unexpectedly in June. The bank is scheduled to
issue its growth projections and inflation outlook on August 3.
The consumer price index including owner occupiers' housing
costs climbed 2.6 percent in June versus 2.7 percent in May. This
was the first fall in the annual rate since April 2016.
Month-on-month, the overall CPI remained flat, while economists
had forecast a 0.2 percent gain.
Another report from the ONS showed that output price inflation
eased to the lowest level so far this year in June.
Output price inflation fell more-than-expected to 3.3 percent
annually in June from 3.6 percent in May. This was the weakest
since December 2016 and below the expected 3.4 percent.
Compared to the previous month, output prices remained unchanged
compared to the expected growth of 0.1 percent. June 2017 was also
the first time in 17 months that the monthly rate has not grown,
the ONS said.
At the same time, input price inflation tumbled to 9.9 percent
from 12.1 percent a month ago. However, the rate was faster than
the 9.3 percent forecast.
June's 9.9 percent increase was the slowest the rate has grown
since September 2016, when it was 7.6 percent.
On a monthly basis, input prices fell for the third month in a
row. Prices slid 0.4 percent but smaller than the forecast of 0.9
percent.
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