LONDON (AFP) – Britain’s annual inflation rate slowed more than expected in June as it dropped below eight per cent, official data showed on Wednesday, easing the country’s cost of-living crisis.
The Consumer Prices Index (CPI) rose by an annual rate of 7.9 per cent, down from 8.7 per cent in May as food price inflation eased, the Office for National Statistics said in a statement.
The CPI rate was the lowest since March 2022, while analysts’ consensus forecast had been for a drop to 8.2 per cent. The United Kingdom (UK) rate remains the highest among G7 nations.
The data sent the British pound sliding against the dollar and euro, although the Bank of England (BOE) is expected to keep on raising interest rates to combat elevated prices, analysts said.
“Food price inflation eased slightly this (June) month, although it remains at very high levels,” Office for National Statistics (ONS) Chief Economist Grant Fitzner said in the release.
He added that although manufacturing costs remained elevated, “the pace of growth has fallen across the last year”.
UK Finance Minister Jeremy Hunt said in a separate statement that “high prices are still a huge worry for families and businesses. The best and only way we can ease this pressure and get our economy growing again is by sticking to the plan to halve inflation this year.”
UK Prime Minister Rishi Sunak has set a target of reducing inflation to five per cent by the end of 2023.
In a bid to cool prices, the Bank of England has ramped up interest rates 13 times in a row to the current level of five per cent.
The move has sparked mortgage turmoil as commercial lenders lift their own rates on home loans, worsening the cost-of-living crisis.
Following Wednesday’s data, the pound dropped under USD1.30 “as softer inflation tempered Bank of England hawks” who favour raising rates, said Senior Analyst at Swissquote Bank Ipek Ozkardeskaya.
“But even with a softer-than-expected figure, inflation in Britain remains high and stickier than in other Western economies, and that keeps odds for further BoE action” on raising rates.
Chief UK economist at Capital Economics Paul Dales said the latest inflation data was “unlikely to be enough to prevent the Bank of England from raising interest rates in early August” to at least 5.25 per cent.
Stubbornly-high inflation is weighing on the wider UK economy, with official data last week showing that output shrank in May.
