United Kingdom interest rate rise in doubt as inflation stays at 2.4%

United Kingdom interest rate rise in doubt as inflation stays at 2.4%

United Kingdom interest rate rise in doubt as inflation stays at 2.4%

The Central Bank of England governor Mark Carney said earlier this month that the economy and wages are rising as the central bank expects to raise interest rates.

Consumer prices climbed 2.4 percent year-over-year in June, the same rate of increase as in the previous two months.

Although the cost of gas and electricity prices increased and the price at the pump hit the highest level for almost four years, consumers benefited from the falling cost of computer games and the summer clothing sales.

But inflation was unchanged from May, as falling prices for clothing helped to offset rising energy costs, the Office for National Statistics said in a statement. "This is likely to mean a slow pace of rate hikes".

Hotel and restaurants sub-components of the CPI decreased from 0.2 of a percentage point in May 2018 to 0.1 of a percentage point in June, pointing to a weak demand due to lower spending patterns.

Upward pressure also came from electricity and gas prices after suppliers including British Gas, EDF and Scottish Power increased their tariffs in response to higher wholesales costs.

Today's data raises the prospect of the Bank of England raising interest rates at a time when inflation has stagnated, wage growth remains tepid, the United Kingdom faces political chaos at home, and the prospect of a damaging trade war hangs over the global economy.

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Wage inflation figures were also released this week showing average weekly wages grew by 2.5 per cent on the year over the past three months.

But some relief emerged for consumers on the high street, where clothing discounts, most strongly felt in men's apparel, left more cash in shoppers' wallets. Investors cut the probability of an August rate rise to 73 percent from 84 percent on Tuesday. There could, however, be rising inflation ahead as manufacturers raise their prices.

"And with few signs of "second-round" effects on wage settlements or inflation expectations, CPI inflation still seems likely to reach the 2 percent target by this time next year". There was also downward pressure from computer games, toys and hobbies.

United Kingdom retail sales could increase by at least 0.4 per cent.

The Retail Prices Index (RPI), a separate measure of inflation, was 3.4% last month, up from 3.3% in May.

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.

Prices of pulses have continued to slump for over a year now, with the rate of decline relatively slowing at (-) 20.23 percent in June, as compared with a de-growth of (-) 21.13 percent in May.

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