Britain's annual inflation rate came in cooler than expected in June, driven by a deceleration in motor fuel and food expenses.
Consumer price growth was at 2.6% year over year in the month, down from May's 2.8%, according to data from the Office for National Statistics released Wednesday. The latest figure came in below the consensus estimate of 2.7%.
"A fall in motor fuel prices, particularly diesel, helped ease inflation in June," ONS Chief Economist Grant Fitzner said. "Food prices fell this month, driven by products including chocolate, margarine and beef."
Transport prices rose by 5.7% annually in June, down from 6.8% a month ago. Meanwhile, the annual increase in food and non-alcoholic beverage costs eased to 1.7% from May's 2.2%.
Excluding energy, food, alcohol and tobacco, the annual inflation rate remained at 2.6%, against the market forecast of 2.5%
The Confederation of British Industry noted the latest inflation print came "broadly in line" with its expectations.
"We expect this easing will prove temporary. Inflationary pressures are likely to firm over the next few months, reflecting the ongoing impact of the Iran conflict on energy bills and some passthrough to domestic prices. Renewed tensions in the Middle East mean that households and businesses will continue to face an uncertain and volatile outlook as we head towards autumn," said Martin Sartorius, lead economist at the CBI.
Against this backdrop, the CBI expects the Bank of England to hold its key rate steady at 3.75% on July 30 as the central bank is anticipated to favor a "wait and see" stance. Despite persistent downside risks, Sartorius said near-term rate hikes are "unlikely" amid "a loosening [labor] market, soft domestic activity, and tighter financial conditions."
