UK inflation holds at 14-month low
Figures suggest delay in rate hike
LONDON, June 13, (Agencies): Britain’s annual inflation rate held in May at 2.4 percent, the lowest level since March 2017 despite high oil prices, official data showed Wednesday.
The Consumer Prices Index 12-month rate had stood at the same level in April, the Office for National Statistics (ONS) added in a statement.
The news was in line with market expectations but weighed on the pound against the dollar.
The rate was unchanged despite the higher cost of motor fuel, which rose with the stronger global oil market. Petrol, or gasoline, is refined from crude.
World oil prices have rallied in recent months owing partly to simmering geopolitical tensions in the oil-rich Middle East region.
“Recent large rises in the cost of crude oil have fed through to prices paid by consumers at the pump,” said ONS inflation chief Mike Hardie, noting that air fares and ferry tickets also increased.
This was offset partly by price falls for computer games, the ONS said.
Official figures show that inflation in Britain remained at an annual rate of 2.4 percent in May, suggesting the central bank may delay an expected rate increase.
Coming after other mixed economic figures, Wednesday’s inflation data mean the Bank of England could put off increasing its key interest rate this summer, as was previously believed.
The Bank of England wants inflation near 2 percent and some thought it might soon raise its main rate by a quarter point to 0.75 percent to do so.
Samuel Tombs, economist at Pantheon Macroeconomics, predicts inflation will gradually ease in coming months anyway, and that the economy “is still subdued by past standards.”
Wages are rising 2.8 percent on the year, but that improvement in living standards “lacks any real momentum.”
Sterling slipped to a one-week low on Wednesday as inflation data failed to bolster chances of an interest rate increase in August with markets wary about headlines on Brexit negotiations.
Consumer price inflation held at an annual rate of 2.4 percent in May, its joint-lowest since March 2017, the Office for National Statistics said on Wednesday, below economists’ forecasts in a Reuters poll of a small rise to 2.5 percent.
The data did little to shake market expectations of an interest rate hike over the course of the year with money markets currently pricing in a 43 percent chance of a 25 basis point hike in August and barely one rate hike by end-2018.
The British currency fell back towards the day’s lows at $1.3309, its lowest levels since June 5, though it trimmed losses to trade flat on the day.
“Markets are in consolidation mode and unless we see a significant improvement in data, sterling should remain around these levels,” said Lee Hardman, a currency strategist at MUFG in London.