Bank of England faces dilemma after potential Taylor Swift upside impact on UK inflation
Inflation in the U.K. held steady at the Bank of England’s target rate of 2% in June
LONDON — The Bank of England is facing a dilemma about whether to cut interest rates next month after official figures Wednesday showed inflation holding steady at its target against expectations of a modest decline, possibly as a result of Taylor Swift's Eras Tour.
The Office for National Statistics said inflation, as measured by the consumer price index, remained at the bank's 2% target in the year to June. Most economists had predicted a decline to 1.9% as lower domestic energy bills filter through.
The statistics agency said the largest upward contribution to the annualized inflation rate came from restaurants and hotels, with some economists attributing the increases to Taylor Swift's tour of the U.K. Swift performed to hundreds of thousands during June in Edinburgh, Liverpool, Cardiff and London and is back in London, so there could be another potential spike then.
«While difficult to fully untangle, it’s certainly very possible that some Taylor Swift effects were at play here and could very well reverse out next month,» said Sanjay Raja, chief U.K. economist at Deutsche Bank.
Following the release of the figures, financial markets think it's now less likely that there will be a majority in the bank's Monetary Policy Committee in favor of cutting the main interest rate from 5.25% at its next meeting on Aug. 1.
Some on the panel have voiced concerns in recent months about the scale of price rises in the crucial services sector, which accounts for around 80% of the British economy, as well as the pace of wage increases, which raise the risks of an inflation rebound if interest rates are cut too soon. Many economists are factoring a
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