UK June 2024 Sticky Inflation Holds at 2% pa

The Office for National Statistics (ONS) has this morning released inflation figures for the UK for June 2024.

After falls over the last few months, UK Consumer Prices (CPI) Index held at 2.0% pa.  Annual increases remained steady, buoyed by falling clothes prices but monthly prices inflation increased by 0.1% pa in June when compared to May 2024.

2.0% pa is the Bank of England’s trend growth/target inflation rate and last week we hade representatives from both the Bank of England the Federal Reserve in the US bot using the term “sustainably” when reflected that inflation needs to be stable and sustainable for each central bank to consider any interest rate cut. We do not have sustainable inflation just yet.

Upwards Price Movements (largest monthly increase first)

• Restaurants and hotels
• Health
• Food and non-alcoholic beverages

Downwards Price Movements (largest monthly decrease first)

• Clothing and footwear
• Alcohol and tobacco
• Communications
• Transport

RPI Falls to 2.9% pa

The old measure of inflation RPI, an arithmetical mean of the average prices of a basket of household spending (rather than the geometric mean for CPI) and still our preferred measure of real inflation, also fell 0.1%pa from 3.0% pa in May after its dramatic fall on 1.2% pa in the last 2 months.  RPI has fallen consistently over the last few years and is now nearly 5 times lower than it was in October 2022 (14.2%pa).

Comment

Given still strong jobs data in the US and for the UK, a bumper July for pubs and hospitality with England’s path to the Euros final, it may be that inflation ticks up again rather than down (July’s inflation figures due for UK on 17^th August), we still strongly believe interest rates will not be cut by the Federal Reserve on 31^st July and 1^st August for the Bank of England.

We have long forecast interest rates to be cut in Autumn although it now appears more likely in September despite many commentators still protecting 1^st August.