ammonnews.net

Ammon News - British inflation held at 2.0% last month, defying forecasts for a slight fall, and strong underlying price pressures prompted investors to rein back on bets that the Bank of England will cut interest rates for the first time since 2020 next month.

Strong increases in hotel prices were partly to blame for the higher-than-expected inflation number, underscoring the BoE's concerns about price pressures in the services sector.

Economists had mostly expected that headline consumer price inflation would ease to 1.9% in the 12 months to June, extending its drop from a peak of 11.1% in October 2022.

Inflation for services was 5.7%, the Office for National Statistics said, unchanged from May. The Reuters poll had pointed to a slightly weaker 5.6% increase.

Rate futures showed investors saw a roughly one in three chance of a BoE rate cut on Aug. 1, the date of its next scheduled monetary policy announcement, down from almost 50-50 before the inflation data.

Sterling briefly rose against the dollar after the data was published before returning to just above its pre-release level.

Data due on Thursday is expected to show wages growing slightly less strongly than in data published a month ago but still rising by almost 6% - roughly double the rate that would be compatible with keeping inflation at 2%.

The BoE is due to announce its next decision on interest rates on Aug. 1 and investors see a roughly 50% chance of a first cut to borrowing costs since 2020.

Reuters