UK Inflation Falls - Charts and Reaction

Price rises continue to ease as energy bills fall. But experts think another interest rate rise is likely in September

Sunniva Kolostyak 16 August, 2023 | 10:17AM James Gard
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The UK headline inflation figure cooled as expected last month, but core inflation proved stubborn, figures from the Office for National Statistics showed on Wednesday.

Annually, consumer prices rose by 6.8% in July, cooling from a 7.9% jump in June. July's reading was in line with market forecasts, as cited by FXStreet, Alliance News reports.

The ONS said that falling gas and electricity prices were the largest contributor to the falling annual rate. A cooling in food inflation also helped, but hotels and airline tickets put upward pressure on prices.

Some Reaction

James Lynch, fixed income manager at Aegon Asset Management: “This along with yesterday's wage data will mean if there was a BoE meeting with only this information another hike of policy rate of 25bps would have been on the cards. We do however have another round of employment and inflation data to look forward to before the next meeting on the 21st September, and this will decide the size of hike, but for now 25bps looks the most likely option.”

Oliver Blackbourn, multi asset portfolio manager at Janus Henderson Investors: “Core inflation remains stubbornly high at 6.9% and is now slightly above the headline level. This presents a headache for the Bank of England (BoE) as it will want to see this less volatile measure decline to suggest that cost pressures are sustainably returning to target. Core inflation suggests a stickier underlying inflation dynamic as services cost growth continued to accelerate.”

Neil Birrell, chief investment officer at Premier Miton Investors: “Inflation in the UK came in a little higher than expected in July, which after strong wage data will keep the Bank of England focused on their next decision on interest rates. They have no room for complacency and would have been hoping, as we all were, for a bigger improvement in inflation last month. We are not yet at the stage in the UK that we can say that we are winning the battle on inflation, there are too many pressures.

Sekar Indran, senior portfolio manager at Titan Asset Management:  "Core inflation remains stubborn and after yesterday’s strong wage growth data, a 50 basis point hike is not off the table in the BoE’s September meeting.”

Hussain Mehdi, Macro & Investment Strategist, HSBC Asset Management: "With core inflation remaining stubborn, and following recent upside surprises to GDP and wage growth, there is now a very good chance the Bank of England will implement another 25bp rate hike at its upcoming meeting ... We think a 50bp hike is unlikely for the MPC given some signs of cooling labour market conditions – namely rising unemployment and falling vacancies."

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Sunniva Kolostyak

Sunniva Kolostyak  is data journalist for Morningstar.co.uk

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