According to BCA Research, efforts to curb inflation in the UK are still ongoing.
The latest inflation report reveals that the core Consumer Price Index (CPI) annual rate remained unchanged at 6.9% in July, with a monthly increase to 0.3%.
This trend is attributed to the tight labor market conditions in the UK. The current situation for the Bank of England is intricate.
On one hand, leading growth indicators such as the RICS survey for the housing market and the CBI’s expected retail sales index suggest that domestic economic activity is deteriorating, ultimately leading to inflationary pressures easing.
On the other hand, UK inflation continues to surpass that of G7 nations and other countries in the Eurozone, potentially remaining above the Bank of England’s 2% target benchmark for a while.
As a result, there remains substantial risk that inflation expectations will become re-anchored.
It is highly likely that the Bank of England will implement a 50 basis points rate hike in their September meeting and aim to raise the bank rate to 6% before the end of the year.
