UK inflation remains at 2% due to events like Taylor Swift's tour and Euro championship

From Morningstar: 2024-07-17 06:33:00

UK inflation held steady at 2% in June, influenced by events like the Taylor Swift Eras tour and the European Championship. Core CPI remained at 3.5%, higher than expected, worrying policymakers. Services inflation at 5.7% also exceeded forecasts, making an August rate cut less likely.

Despite concerns over inflation, Michael Field from Morningstar believes the 2% rise is not alarming. Factors like the BoE’s 2% target and an unemployment rate of 4.4% may delay an interest rate cut. Savings in input costs could eventually reduce services inflation as well.

June saw increases in prices due to various factors, like Taylor Swift’s concert and summer football events. Wet weather led to discounts on summer clothes, balancing out rising food prices. Wage and employment data are expected to confirm ongoing inflationary pressures, potentially delaying a summer rate cut.

At the last meeting, seven MPC members voted to hold rates, citing the need for more evidence of diminishing inflation persistence. With the headline CPI at 2%, the Bank anticipates a rise to 2.5% by year-end. The recent change in government and robust GDP growth add uncertainty to the economic outlook.

The Bank of England’s 5.25% interest rate remained unchanged since 2023, while European central banks have cut rates this year. The BoE’s rate is now the highest in Europe, out of sync with other institutions. This divergence raises questions about the UK’s monetary policy strategy and economic competitiveness.



Read more at Morningstar: Why Isn’t UK Inflation Falling? Blame Taylor Swift…