Inflation remained unchanged in June, aligning with the Bank of England’s 2 percent target for the second consecutive month, according to official data.
The stability of the price growth follows a period of elevated inflation rates that had impacted households due to rising food and energy prices. Currently, inflation remains well below its recent annual peak of 11.1 percent in October 2022.
The Office for National Statistics (ONS) reported that while the headline rate held in June, there were some fluctuations in specific sectors.
Prices for restaurants and hotels grew by 0.9 percent between May and June. The ONS said that hotels drove the rise in the annual rate, accounting for a monthly rise of 8.8 percent.
Hotel prices grew strongly while second-hand car costs fell but by less than this time last year.
The monthly rate in clothing fell by 1.2 percent, compared to a 0.2 percent rise a year ago. The annual rate was 1.6 percent, compared with a rise of 3.0 percent in the year to May.
Caution
Despite the headline inflation rate meeting the BoE target, core inflation, which excludes food and energy prices, held at 3.5 percent.Inflation in the services sector, closely watched by the BoE, remained at 5.7 percent. Price increases in services are largely driven by wages, which in June recorded strong growth results. This can affect services inflation, keeping it elevated in the near term and posing an upward pressure to headline inflation.
Last month, the bank kept the interest rate at 5.25 percent and said that its monetary policy will remain restrictive for as long as it takes for inflation to “sustainably” remain at the 2 percent target.
He also noted that many households have yet to feel the benefit of lower inflation due to the high cost of food and energy.
Economic Inheritance
Compared to other European countries, UK inflation was below France’s (2.5 percent) and Germany’s (2.5 percent) in the 12 months to June.June inflation figures are the first to be released since the Labour Party formed a new government at the beginning of this month.
Chief Secretary to the Treasury Darren Jones welcomed the news of inflation at BoE’s target, but acknowledged that prices remain high across the country.
“We face the legacy of 14 years of chaos and economic irresponsibility. That is why this government is taking the tough decisions now to fix the foundations so we can rebuild Britain and make every part of Britain better off,” said Mr. Jones.