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UK inflation remained stable at the Bank of England’s target of 2% in June, Office for National Statistics data showed on Wednesday.
The overall index beat analysts’ expectations of 1.9 percent and was the same as the previous reading of 2 percent in May, according to a Reuters survey of economists.
The pound rose slightly immediately after the announcement and was trading at $1.2977 as of 7:21 a.m. London time.
Services inflation, which is closely watched by the Bank of England because of its dominance in the UK economy and reflects domestically generated price increases, remained at 5.7% in June.
Core inflation, which excludes energy, food, alcohol and tobacco, was 3.5%, also consistent with May’s 3.5%.
Rising prices in restaurants and hotels were the biggest source of upward pressure, while clothing and footwear prices saw the biggest falls, the ONS said.
With big-name artists such as Taylor Swift, Bruce Springsteen, Pink and Sting touring nationwide, consumers are increasing their spending on cultural experiences, concerts and other leisure activities over the summer.
Watch for Bank of England rate cut
Investors had been focused on a possible rate cut in August as headline inflation showed signs of sustained moderation, and market hopes for such a cut faded shortly after the latest data was released.
Jane Foley, head of currency strategy at Rabobank, said stubborn services inflation could lead Bank of England policymakers to adopt a cautious stance ahead of their meeting next month.
“We haven’t decided yet about August,” she said Wednesday on CNBC’s “Squawk Box Europe.”
“I think a lot of members of the policy committee and a lot of economists will be looking at service sector inflation and getting a little worried,” she added.
Jonathan Haskell, a member of the Bank of England’s Monetary Policy Committee, said last week that interest rates should be kept on hold because of ongoing labor market pressures.
Bank of England chief economist Hugh Pill added later in the week that the timing of a rate cut remained an “open question” because of the “unsettled strength” of wage growth.
The Bank of England’s key interest rate has been hovering at 5.25%, its highest level in 16 years, since August 2023, when inflation was at 7.9%.
Wednesday’s figures are the first since Britain’s July 4 general election but do not reflect a change in government. Britain’s new Chancellor of the Exchequer, Darren Jones, said in a statement that prices remain too high.
“We face a legacy of 14 years of chaos and economic irresponsibility, which is why this government is now taking tough decisions to repair the foundations, rebuild Britain and make every part of the UK better,” he said on Wednesday.
