This morning’s data showed that the Consumer Price Index (CPI) was 2.2 per cent higher in July, compared to a rise of just two per cent in June, according to official figures from the Office of National Statistics (ONS) – below the city forecasts. 2.3 percent.
The rate of inflation last increased in December 2023, when the CPI rose from 3.9 percent to four percent.
The ONS said the main reason for the tick-up in the inflation rate was that gas and electricity prices did not fall as sharply as they had in the same month last year past
And money markets now indicate that there is a 45 percent chance that the Bank rate will be cut to 4.75 percent next month, from its current level of five percent, and a 55 percent chance percent that borrowing costs remain unchanged.
Before this morning’s announcement, there was only a 36 percent chance there would be a cut in September, based on city rates.
Traders expected that there will be two tax cuts seen in the UK at the end of this year – first, only one cut was fully “priced”, with a second seen as likely.
Aaron Hussein, global market strategist at JP Morgan Asset Management, he told the Guardian that inflation seemed to be going in the right direction, but it was better to tame expectations.
He said: “Today’s inflation picture will reassure committee members who voted for a rate cut last month that they can finally tame the inflation beast. While headline inflation has marked as favorable base effects fade, services inflation – a crucial measure of internally generated inflationary pressure – has moderated. This, coupled with moderate wage growth, suggests that inflation may be finally in the right direction.
“However, with economic growth in cyclical growth and the labor market remaining resilient, there remains the risk that cutting too quickly will fan the flames of inflation. Therefore, we think it is unlikely that the Bank will follow through on its cut of August with a cut in September In the absence of a material shock to growth, this cut cycle is likely to be gradual, with a quarterly cadence more likely.
Here’s what it all means.
The Bank of England
Yui Mok / PA Wire
When is the next interest rate announcement?
The next CPI release date is scheduled for September 18, which will be the date covering August.
The Bank of England then has a team to look at the evidence and make a decision about every six weeks. They are known as the Monetary Policy Committee. Every three months, they give detailed reasons behind their decisions in a Monetary Policy Report. The MPC will announce its next decision on interest rates on Thursday, September 19.
Have interest rates gone up?
In June, interest rates remained at 5.25 percent for the seventh meeting in a row. The committee takes a decision on interest rates every six weeks and publishes the background to it.
When is the next interest rate announcement?
The MPC meets eight times a year to discuss whether to raise or cut interest rates, or keep them the same.
The two remaining meetings after September will take place on the following dates: