Sticky UK Inflation Expected to Inch Up Again
UK inflation remained above the Bank of England's 2% target, with the Office for National Statistics reporting CPI inflation at 2.6% in the year to June, slightly below analyst expectations of 2.7% and down from 2.8% in May. Core CPI, excluding food and energy, also stood at 2.6%. Analysts and the Bank forecast inflation could edge closer to 3% later this year, driven by business tax hikes from Rachel Reeves' first Budget and disruption to oil supplies due to the blocking of the Strait of Hormuz amid the Iran war. The new government under Prime Minister Andy Burnham announced measures including stripping VAT from household electricity bills from October, which could reduce inflation by 0.1 percentage points. The Bank of England is widely expected to hold interest rates at 3.75% at its next meeting, with markets pricing in at least two rate hikes as the UK battles persistent inflation.
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