UK inflation eased further in June, with headline CPI slowing from 2.8% yoy to 2.6% yoy, below expectations of 2.7%. Monthly CPI rose 0.1% mom, matching forecasts but slowing from May’s 0.2% increase. The data extends the UK’s gradual disinflation trend, suggesting overall price pressures continue to moderate even as heightened geopolitical tensions keep energy markets volatile.
Beneath the headline, however, the picture was more nuanced. Core CPI, which excludes energy, food, alcohol and tobacco, held steady at 2.6% yoy, exceeding expectations for a slight easing to 2.5%. Goods inflation continued to soften, slowing from 2.0% to 1.7%, while services inflation—a key gauge of domestic price pressures monitored by the Bank of England—edged down from 3.7% to 3.6%. The easing in services inflation is encouraging, but the resilience of core inflation suggests underlying price pressures have yet to fully dissipate.
Overall, the report is unlikely to materially alter the Bank of England’s policy outlook. Softer headline inflation supports the broader disinflation narrative, but the upside surprise in core CPI should temper expectations that policymakers are gaining a decisive victory over inflation. With Governor Andrew Bailey having ruled out near-term monetary easing, the latest figures reinforce the case for keeping interest rates unchanged while awaiting further evidence that underlying inflation is easing more convincingly.
Economic Data
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| CPI (yoy) | 2.6% | 2.7% | 2.8% |
| CPI (mom) | 0.1% | 0.1% | 0.2% |
| Core CPI (yoy) | 2.6% | 2.5% | 2.6% |
Inflation Components
| Component | Current | Previous | Trend |
|---|---|---|---|
| CPI Goods (yoy) | 1.7% | 2.0% | ↓ Slowed |
| CPI Services (yoy) | 3.6% | 3.7% | ↓ Eased |
Key Takeaways
- Headline CPI slowed from 2.8% to 2.6% yoy, undershooting the 2.7% consensus.
- Monthly CPI rose 0.1%, matching expectations and slowing from 0.2% previously.
- Core CPI held steady at 2.6% yoy, above expectations for 2.5%, indicating underlying inflation remained sticky.
- Goods inflation eased from 2.0% to 1.7%, pointing to continued normalization in consumer goods prices.
- Services inflation slowed from 3.7% to 3.6%, suggesting domestic price pressures continued to moderate gradually.
- The report was mixed overall, with softer headline inflation offset by firmer-than-expected core inflation, leaving the Bank of England’s policy outlook largely unchanged.
