UK inflation reaches its highest level since early 2024

According to Bloomberg, the Bank of England's strategy to ease monetary policy was thrown into disarray by a surprising surge in UK inflation in June, which reached its highest level since the beginning of 2024.

Data from the National Statistics Office revealed that the Consumer Price Index (CPI) rose from 3.4% to 3.6% by the end of last month, thus exceeding economists' forecasts. The hike was chiefly propelled by motor fuel prices, which exhibited a more modest decline compared to the previous year.

Although inflation remains significantly above the central bank’s 2% target, the BoE views such an uptick as temporary. Analysts expect CPI growth to moderate by year-end as the UK economy cools and the labor market weakens. However, persistent service inflation (4.7%) and elevated food prices (4.5%) could continue to weigh on the country's GDP.

Despite the rate staying high, BoE Governor Andrew Bailey said there might be a cut if the labor market gets worse under the new government's tax reforms.