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U.K. Inflation Unexpectedly Holds Steady As Pound Drop Unwinds

Published on Aug 15 2017 2:20 PM in Retail tagged: UK / Inflation / Retail Price Index

U.K. Inflation Unexpectedly Holds Steady As Pound Drop Unwinds

The U.K. inflation rate was unchanged in July as the effects of the pound’s drop after the Brexit vote a year ago started to fade.

Consumer prices increased 2.6 percent, the Office for National Statistics said on Tuesday. Economists forecast a 2.7 percent rate. The pace of factory input-price gains fell the most since 2012.

Economists have lowered estimates for how fast inflation will accelerate this year after the pound’s 13 percent decline since the U.K. voted to leave the European Union sparked a pickup in price growth over the past year. The report supports Bank of England Governor Mark Carney’s case for waiting to raise interest rates from a record low even as inflation breaches the 2 percent target.

The pound fell after the data were published and was trading down 0.4 percent at $1.2913 as of 9:31 a.m. in London.

Core inflation -- which excludes volatile food and energy prices -- was unchanged from 2.4 percent. Input prices for factories increased 6.5 percent on the year, compared with a 10 percent rate in June.

Retail Price Index

The retail price index, used by rail carriers to set fares this month, nevertheless rose 3.6 percent on the year, up from 3.5 percent in June.

The cost of motor fuel kept a lid on consumer prices last month, the ONS said in the report. Prices for clothing, household goods and food propped up the inflation rate.

While two BOE policy makers backed an increase to keep prices in check at the last meeting, Carney said the uncertainty from Brexit augured to keep borrowing costs unchanged.

News by Bloomberg, additional reporting by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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