U.K. Inflation Cools Supporting the BoE
U.K. inflation cooled more than economists forecast in July, giving the Bank of England room to keep its key interest rate at a record low.
The rate of consumer-price growth fell to 1.6% from 1.9% in June, the Office for National Statistics said today in London. Economists had forecast 1.8%, based on the median of 32 estimates in a Bloomberg survey.
The BOE kept its key rate at 0.5% this month and Governor Mark Carney said it’s not yet time to tighten policy.
“The MPC can afford to leave monetary policy quite loose while inflation pressures are extremely weak,” said Samuel Tombs, an economist at Capital Economics Ltd. in London, one of only two economists to correctly predict the July reading.
In July, the biggest downward effect on inflation came from clothes, as summer discounting by stores took effect later than usual. Overall consumer prices fell 0.3% from June, the statistics office said.
While inflation is below the BOE’s target, it continues to outpace wage growth, squeezing consumers. Earnings fell an annual 0.2% in the second quarter, the first drop since 2009.
Source: Bloomberg
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