The falls in CPI inflation from 8.7% in May to 7.9% in June (consensus 8.2%, BoE May MPR 7.9%) and core inflation from 7.1% to 6.9% (consensus 7.1%, CE 7.0%) are unlikely to be enough to prevent the Bank of England from raising interest rates in early August from 5.00%, although it may tilt the balance towards a 25 basis point (bps) hike rather than 50bps. Even so, we think there is enough momentum in wage growth and services inflation to raise our forecast for the peak in Bank Rate from 5.25% to 5.50%.
We’ll be discussing the UK inflation, growth and policy outlook in 20-minute online briefing at 9am BST today. Register here.
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