Britain receives good news on inflation, persistent pressure has not ended

On July 18, the UK Office for National Statistics said that annual inflation fell from 8.7% in May 2023 to 7.9% in June 2023, the lowest level since March 2022.

UK inflation shows signs of cooling. (Source: Getty Images)

The figure was lower than the 8.2% forecast by economists polled by Reuters news agency.

However, June 2023 inflation data was in line with the Bank of England's (BoE) forecast of 7.9%.

Core inflation (excluding food, energy, alcohol and tobacco prices) also eased to 6.9%, from a 31-year high of 7.1% last month.

Analysts say that core inflation will remain unchanged in the near term. Inflation in the services sector fell to 7.2% from a 31-year high of 7.4% in May.

"Core inflation and service sector inflation will ease as the impact of previous rate hikes takes effect," forecast Paul Dales, chief economist at Capital Economics.

Previously, the BoE said that the country's economy has so far proven to be "resilient" to the sharp increase in interest rates over the past year, but it will take time to see the full impact of this trend.

BoE Governor Andrew Bailey stressed: "The UK economy and financial system so far remain resilient to the risks from interest rates."

Capital Economics said the “persistent pressures” that have not yet ended will cause the BoE to raise interest rates slightly and they are likely to peak in the range of 5% to 6%.

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