According to the report from the Office for National Statistics (ONS), in June consumer prices rose by 2.0% per year after a similar increase in May. The latest reading was the lowest since July 2021.However, economists had expected inflation to fall to 1.9% per annum.
The ONS said that the largest downward contributions to the CPI annual rates came from clothing and footwear, with prices of garments falling this year having risen a year ago. Meanwhile, the largest upward contribution came from restaurants and hotels, where prices of hotels rose more than a year ago.
Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose by 3.5% per annum (the lowest rate since October 2021) after an increase by 3.5% in May. Consensus estimates also suggested an increase by 3.5% per annum. On a monthly basis, core consumer prices rose by 0.2%, compared with the 0.5% increase in May and the market estimate of a 0.1% increase.
The data also showed that on a monthly basis, the consumer price index increased by 0.1%, slowing down from May (+0.3%) and confirming economists' forecasts.
Overall, the latest data had almost no impact on market participants' expectations regarding the monetary policy of the Bank of England, which will hold its next meeting on August 1. Now investors see a roughly 50% chance of a first cut to borrowing costs since 2020 in August.