Sticky services and core inflation in June defy BoE expectations, clouding the outlook for rate cuts.
UK headline CPI fell 0.2pp to 2.6% in June, matching the Bank of England’s forecast, but core inflation remained unchanged at 2.6%. Services inflation eased only 0.1pp to 3.6%, missing consensus expectations of a 0.2pp decline.
Analysts had anticipated a broader easing in core and services inflation, but strength in information processing equipment and hotel/catering sectors offset declines in food prices. Upstream services prices, particularly in transport and storage, also rose sharply, contributing to the resilience.
The data complicates the BoE’s policy path, as persistent inflation pressures may delay anticipated rate cuts.