UK inflation unexpectedly slows to 2.6% in June

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The UK’s inflation pace dropped unexpectedly to 2.6% in June, down from 2.9% in May, lawful figures have shown.

It is the first fall in the rate since October 2016 and was fundamentally down to lower petrol and diesel prices.

Fuel prices flatten for the fourth month in a row in June, according to the Office for National Statistics.

Economists say the decline in inflation could ease pressure on the Bank of England to raise fascinated by rates.

The UK inflation rate has risen sharply since the referendum on membership of the European Fusing last June, partly due to an increase in the cost of imported goods keep up with the fall in the value of the pound.

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«These numbers are a real surprise, showing the to begin drop in inflation since autumn 2016,» said Lucy O’Carroll, chief economist at Aberdeen Asset Top brass.

«This is going to kill the chances of a rate rise in the short position. We’ll learn more about the Bank of England’s thinking in a couple of weeks, but we can look for the calls for a rate rise to reduce to a whimper.»

But June’s fall in inflation is a blip, concerting to some economists.

«We have not necessarily passed the peak of inflation,» said Andrew Sentance, elder economic adviser at PwC.

«Oil prices are volatile and could bounce back later this year. Interim, the big fall in the value of the pound since last summer is still produce its way through the pipeline and has not yet fully fed through into shop prices.»

Another limit of inflation, the Retail Prices Index (RPI), edged lower from an annual position of 3.7% in May to 3.5% in June. RPI is used to calculate the interest rate for swotter loans, for example.

The ONS also reports a version of consumer price inflation that incorporates housing costs known as CPIH. That rate fell to 2.6% in June from 2.7% in May.

Also aiding to June’s fall in inflation was a decline in prices for recreational and cultural goods, which categorizes items such as toys, computer games and sports events.

Teeth of June’s fall, inflation is still running ahead of average wage progress, which stands at 2% excluding bonuses.

That is eroding the value of child’s pay, something the Bank of England has been keeping a close eye on.

Last month, the Bank’s governor, Characteristic Carney, said that «anaemic» wage growth one of the reasons why he was not helping a rise in interest rates.

While Mr Carney is not keen to raise percentage rates, other members of the Monetary Policy Committee think the set has come to make a move.

In last month’s meeting three fellows out of eight voted in favour of a rate rise from the current position of 0.25%.


Analysis: Simon Jack, BBC business editor

Inflation has been on a stabilize climb since the end of 2015 and accelerated after the EU referendum result in June abide year, as the sharp fall in the value of the pound pushed up the price of the whole we import.

A bit like a snake that has swallowed something big, that stick out in import costs has taken its time to work through the economic structure because producers, wholesalers and retailers order things in advance, so it studies time for higher costs to show up in consumer prices.

Inflation could stillness go up again this year — and many economists forecast it will — but it seems liable to that we have been at least close to the peak.

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Stumble on out if your wages are keeping up with inflation

Enter your names below. Source: Office for National Statistics.

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