This article is from the source 'independent' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.independent.co.uk/news/business/news/uk-inflation-latest-update-rate-falls-june-bank-england-interest-british-economy-a7846436.html

The article has changed 5 times. There is an RSS feed of changes available.

Version 0 Version 1
UK inflation rate falls unexpectedly in June UK inflation rate falls unexpectedly in June on back of lower petrol prices
(35 minutes later)
The UK's inflation rate unexpectedly slowed to 2.6 per cent in June according to the Office for National Statistics. The UK's inflation rate unexpectedly slowed to 2.6 per cent in June according to the Office for National Statistics, driven largely by lower prices at petrol pumps.
The rate was down from 2.9 per cent in May, a nearly four year high. City of London analysts had expected the rate to remain steady in the month. The headline rate was down from 2.9 per cent in May, a near four-year high.
City of London analysts had expected the rate to remain steady in the month and to continue climbing above 3 per cent later in the year.
The pound dropped sharply to $1.3030, down 0.18 per cent on the day, in response to the figures, as many traders bet that the surprise slowdown would limit the likelihood of a rate hike next month by the Bank of England.The pound dropped sharply to $1.3030, down 0.18 per cent on the day, in response to the figures, as many traders bet that the surprise slowdown would limit the likelihood of a rate hike next month by the Bank of England.
Core inflation, which strips out volatile energy and food prices, was 2.4 per cent, down from the 2.6 per cent in May and also lower than the City consensus had expected. "The Bank of England has taken a noticeably hawkish line recently, but today’s data casts doubt over a rate hike later this year," said James Smith, an economist at ING.
Inflation had been rising sharply since last year's Brexit vote, mainly stemming from the 13 per cent slump in the pound in the wake of the referendum, which has sent import prices up dramatically. "Even if inflation does recover the decision to hike rates still hinges on the growth outlook".
The ONS said that the biggest downward drag on the change in the CPI inflation rate between May and June had been transport, followed by recreation and culture. Core inflation, which strips out volatile energy and food prices, was 2.4 per cent, down from the 2.6 per cent in May and also lower than the City consensus had expected.
There was also downward pressure from clothing and footwear and housing an household services. Inflation had been rising sharply since last year's Brexit vote, stemming to a large extent from the 13 per cent slump in the pound in the wake of the referendum, which has sent import prices up dramatically.
The ONS also reported that factory input prices in June rose by 9.9 per cent in the year to June, down from the 12.1 per cent rate in May and much lower than the near 20 per cent peak recorded in January.
The ONS said that the biggest downward drag on the change in the CPI inflation rate between May and June had been transport, with fuel prices falling 1.1 per cent in the month and the annual price growth rate falling from 7.5 per cent to 4.1 per cent.
The next biggest drag was recreation and culture.
There was also some downward pressure from clothing and footwear and housing an household services.
This was offset slightly by upward pressure on the rate from furniture and household goods and food and non-alcoholic beverages.This was offset slightly by upward pressure on the rate from furniture and household goods and food and non-alcoholic beverages.
Inflation has been higher than average nominal wage growth in recent months, meaning falling real incomes.
Analysts said that this squeeze was unlikely to end sooner, despite Monday's prices data.
"While inflation dipping to 2.6 per cent in June offers some relief to consumers, it will still highly likely have been clearly above pay growth, thereby resulting in a further drop in consumers’ real earnings. Latest data show that total weekly average earnings growth was 1.8 per cent in the three months to May, while regular earnings growth was 2.0 per cent," said Howard Archer of IHS Global Insight.
"Consumers still look unlikely to see any significant easing in their squeeze before 2018."