British inflation rose unexpectedly in June to a peak of 18 months of 3.6 percent, in a setback for the Bank of England, because it tries to lower interest rates to support the delaying economy of the country.
The figure of Wednesday of the Office for National Statistics exceeded the prediction of analysts who were questioned by Reuters that inflation would remain at the level of 3.4 percent.
The increase in inflation was driven by gasoline prices and a jump in airline tickets and the price of train tickets, according to De us.
The figures leave British inflation sharply above the rates in other major European economies. German inflation was 2 percent in June, while EU-wide inflation was 2.2 percent.
Sanjay Raja, Chief UK Economist at Deutsche Bank, said that the Boe would probably still lower interest rates next month.
“Is a August reduction in danger? No, we don’t think so,” he said. “There is enough delay in GDP and the labor market to justify a ‘gradual and careful’ lighting of monetary policy.”
The British economy contracted for a second consecutive month in May, after a robust expansion of the first quarter, because companies compete with tax increases and the uncertainty is unleashed by the trade war of US President Donald Trump.
The market reaction was filled in because this year traders continued to bet on a total of at least two quarter-point reductions, according to levels that are implicated by Swaps markets.
Biennial gilded yields, which follow the expectations of the interest, were 0.2 percentage points higher to 3.86 percent. The pound increased by 0.1 percent compared to the dollar to $ 1,339.
The Monetary Policy Committee of BOE, which has an inflation objective of 2 percent, has reduced four times since last summer, but policy makers have been divided on how persistent price pressure will be.
Last month it voted six to three to keep rates unchanged at 4.25 percent, after a quarter -point reduction in May.
Zara Nokes, global market analyst at JPMorgan Asset Management, said that the bank should be able to ‘lower’ in August, but ‘had to’ exercise a certain degree of caution ‘after that meeting.
She said that although delaying the growth should “remove part of the heat from the price pressure”, the BOE should remain aimed at lowering inflation “until this is created in the hard data”.
Strong clothing and food prices have contributed to the profit in the main number, in a sign that companies may rise in the contributions of the national insurance policies and the minimum wage to consumers, analysts said.
The core inflation, which excludes energy and food, was 3.7 percent in June, an increase of 3.5 percent in May, De us told us on Wednesday. Services Inflation, a key meter for price pressure for the MPC, was unchanged of the 4.7 percent of May, which predicted the 4.6 percent by economists.
The unexpected strength of the price inflation of the services will be concerned in particular about the BOE, which the meter has closely monitored as a sign of underlying price pressure. The central bank expected that the inflation of services would remain at 4.6 percent.
Matt Swannell, Chief Economic Adviser at the EY Item Club, said that “the headline inflation is expected to come in the coming months and peak in September”.
He added that this would probably be followed by a decrease in inflation as energy prices fell, although this would be compensated to a extent by “stickiness” in services.
The MPC has also indicated its concern about increasing signs of weakness on the labor market.
Andrew Bailey, Boe -Gouverneur, warned last month that more companies adopted it, reduced hours and wages after the increase in the national insurance contributions of employers, announced in the autumn budget of Chancellor Rachel Reeves and came into force in April.
Reevering on the inflation figures, Reeves said: “I know that working people are still struggling with the costs of living … But there is more to do and I am determined that we are making our plan for change to put more money in the pockets of people.”
Mel Stride, conservative shadow Chancellor, said: “This morning’s news that inflation stays well above the goal of 2 percent, is very much care for families.”
