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The Office for National Statistics (ONS) will release the UK June consumer price index (CPI) data at 12:00 Beijing time on Wednesday.
The UK inflation report is likely to reinforce expectations of a rate cut by the Bank of England (BOE) in August, sending sterling volatility soaring.
What to expect from the new round of UK inflation data?
UK consumer prices are expected to come in at an annual rate of 2.0% in June, unchanged from May and within the Bank of England’s 2.0% target.
Core inflation was likely unchanged at an annual rate of 3.5% in June. Meanwhile, UK inflation is expected to be 0.1% monthly, after rising by 0.3% in the previous month.
Official data is expected to show services sector inflation fell to 5.6% in June from the previous reading of 5.7%, according to a Bloomberg survey of economists.
Analysts at TD Securities (TDS) pointed out when previewing UK inflation data: “Severe deflation in energy prices should bring overall inflation closer to the 2% target in June, but core inflation is likely to remain at a stalemate at an annual rate of 3.5%. ”
Analysts at TD Securities (TDS) said, “The focus will continue to be on the services sector, and as momentum remains strong, we believe services inflation will be flat at the annual rate. The Taylor-Swift effect should not have much impact on this data The impact, in our view, is greater in August.”
Encouraging UK growth data and cautious comments from Bank of England chief economist Huw Pill last week helped push back the timing of the Bank of England’s first interest rate cut since the pandemic ravaged the world in 2020.
Data released by the Office for National Statistics (ONS) on Thursday showed that UK economic growth expanded by 0.4% in May after stagnating in April, beating expectations of 0.2%.
Meanwhile, Bank of England chief economist Peel on Wednesday dampened expectations for a rate cut in August. “I think it’s still an open question whether now is the time to cut interest rates,” Peel said. “While headline annual inflation fell to the Bank of England’s 2% target in May, services inflation and wages growth remain ‘encouragingly strong'” disturbed'”.
Money markets now price a 50% chance of a 25 basis point rate cut from the Bank of England on August 1, down from 62% early last week.
