'Sterling will suffer in short term': June inflation unchanged at 2.4%

Summer clothing sales holds back inflation

Official figures from the Office for National Statistics show the Consumer Prices Index rate of inflation held steady at 2.4 per cent in June, unchanged from a month earlier.

"The lagged transmission of higher crude oil prices, an uptick in cotton prices and electricity tariffs, the hardening of inflation for manufactured products as well as an unfavourable base effect, led to the sharp pickup in the WPI inflation to a 54 month high in June 2018", said Aditi Nayar, Principal Economist at ICRA, as reported by MoneyControl.

However, although the price of gas and electricity increased, and petrol prices rose to their highest level since September 2014, the cost of clothing and computer games fell.

"Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen", ONS Head of Inflation Mike Hardie said. That's particularly the case after yesterday's wage growth data emerged weaker than expected.

The figures represent the last take on inflation before BOE policy makers decide whether to raise interest rates on August 2.

"Once the Bank has hiked rates in August, we think heightened Brexit uncertainty could make it very complicated for policymakers to raise rates again before May 2019".

The Bank has raised interest rates before in the past even when inflation has been below its two per cent target, in the expectation that inflationary pressures will build over the medium term.

He noted that 10 of the 12 largest energy suppliers - including British Gas, Scottish Power, EDF Energy - have announced price rises which will kick in over the summer.

The Consumer Prices Index including owner occupiers' housing costs (CPIH) remained at 2.3% in June 2018 and has steadied from its recent high of 2.8% in autumn 2017. There could, however, be rising inflation ahead as manufacturers raise their prices.

On a monthly basis, consumer prices remained flat in June versus the expected increase of 0.2 percent.

The Retail Prices Index (RPI), a separate measure of inflation, was 3.4% last month, up from 3.3% in May. The ONS report shows that the British economy has added 137,000 jobs, and that there are still 824,000 unfilled vacancies, but rates of pay are not increasing as rapidly as they once did.

Food prices eased by 0.6%, due primarily to a drop in fruit prices and a category that includes syrup, sugar, jam, chocolate and confectionery, for which prices fell 1.1% and 1.3% respectively.

Separate data from the ONS showed that average house prices in the United Kingdom in May grew at the slowest annual rate since August 2013.

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