LONDON — U.K. headline inflation cooled sharply in July to an annual 6.8%, but the core consumer price index remained unchanged, posing a potential headache for the Bank of England.
The headline CPI reading was in line with a consensus forecast among economists polled by Reuters, and follows the cooler-than-expected 7.9% figure of June. On a monthly basis, the headline CPI decreased by 0.4% versus a consensus forecast of -0.5%.
However, core inflation — which excludes volatile energy, food, alcohol and tobacco prices — stayed 6.9%, unchanged from June and slightly above a consensus forecast of 6.8%.
“Falling gas and electricity prices provided the largest downward contributions to the monthly change in CPIH and CPI annual rates; food prices rose in July 2023 but by less than in July 2022, also leading to an easing in the annual inflation rates,” the Office for National Statistics said.
“Hotels and passenger transport by air were the classes that provided the largest offsetting upward contributions to the change in the rate.”
Gareth Davies, exchequer secretary at the U.K. Treasury, told CNBC on Wednesday that the data would be met with relief by households and families across the country, but that the government and the central bank were “not out of the woods” in their efforts to rein in inflation.
“The plan that we are executing on is clearly working but we need to keep with that plan, keep making responsible decisions when it comes to public finances, and we need to make sure that fiscal policy is aligned with monetary policy at the Bank of England,” Davies told CNBC’s “Squawk Box Europe.”
The Bank of England’s monetary policy meeting earlier this month produced a split vote to hike the main interest rate by a quarter percentage point to a 15-year high of 5.25% — in the 14th consecutive increase to the key rate.
The Monetary Policy Committee gave little indication that the era of high interest rates was likely to end soon, vowing to “ensure that Bank Rate is…
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