Inflation comes in under expectations at 7.9% but UK remains 'drastic outlier'
'We would not push back against market pricing of a 6% terminal Bank Rate and think rate cuts are unlikely until late 2024.'
Core inflation also came in below expectations, with a reading of 6.9% compared with predictions of 7.1%.
While both measures have offered a positive surprise, investors, economists and the chancellor are veering on the side of caution.
UK grocery price inflation sees biggest drop since March 2023 peak
Chancellor Jeremy Hunt welcomed the lowest inflation reading since March 2022, but asserted HM Treasury was not «complacent» and acknowledged the «huge worry» high prices pose for businesses and families.
He added: «The best and only way we can ease this pressure and get our economy growing again is by sticking to the plan to halve inflation this year.»
Marcus Brookes, chief investment officer at Quilter Investors, noted that despite the «glimmer of light» offered by June's inflation figures, the UK remains a «drastic outlier» compared to other developed economies in the fight against inflation.
«Frustratingly, while also beating expectations core inflation is remaining persistently stubborn and refusing to budge significantly,» he explained. «It may be that finally the well-known lags in the effect of interest rate rises are beginning to have an effect, but it still remains very sticky so way too early to begin celebrating. Demand has withstood both inflation and the rise in rates, but cracks are appearing, and as more mortgage holders get exposed to the current rates, the economy is likely to be hit as a result.»
While the impact of interest rates is seemingly translating through to the economy, few are anticipating a shift in tone from the Bank of England.
Hussain Mehdi, macro investment
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