UK Inflation Steady At 2.0%

(RTTNews) - UK inflation remained unchanged at the official target in June but the stability of services inflation reduced chances of a rate cut in August.

The consumer price index grew 2.0 percent on a yearly basis, the same pace of growth as seen in May, the Office for National Statistics said Wednesday. Headline inflation was expected to ease to 1.9 percent.

On a monthly basis, the CPI edged up 0.1 percent, as expected, after a 0.3 percent gain in May.

Excluding energy, food, alcohol and tobacco, core inflation remained unchanged at 3.5 percent, and on par with expectations.

Goods prices dropped 1.3 percent, while services inflation remained at 5.7 percent, the ONS said. While, higher restaurant and hotel prices provided upward pressures, clothing and footwear cost logged the biggest declines.

Capital Economics' economist Paul Dales said the chances of an interest rate cut in August diminished a bit more as services inflation steadied at 5.7 percent.

Last month, the Bank of England retained its bank rate at a 16-year high as policymakers were concerned about services inflation and wage growth. The next monetary policy announcement is due on August 1.

The ONS is scheduled to issue wage data on July 18. Average earnings including bonus are forecast to grow at a slower pace of 5.7 percent in three months to May, but it is still well above the rate that would be compatible with keeping inflation at the target.

Another data from the ONS showed that input prices dropped at a pace of 0.4 percent in June, following May's 0.7 percent decrease. Fuel prices made the largest downward contribution to the annual rate.

At the same time, factory gate inflation softened to 1.4 percent from 1.7 percent in May.

On a monthly basis, input prices eased 0.8 percent after falling 0.6 percent in May. Prices were expected to climb 0.1 percent.

Output prices decreased 0.3 percent on month compared to a flat rate in May. Economists had forecast a marginal 0.1 percent growth for June.