“While these figures provide further reassurance that the UK’s inflation crisis is in the rear-view mirror, uncomfortably high services inflation suggests that its damaging after-effects are still being felt.
“Though it may slow in July, following the fall in Ofgem’s energy price cap, inflation is likely to drift moderately higher, thereafter, fuelled by stronger demand from a faster growing economy and low labour supply.
“Sticky services inflation will cause considerable unease at the Bank of England because it suggests that underlying price pressures are frustratingly persistent and leaves the UK more vulnerable to the impact of future price shocks.
“While anxiety over underlying price pressures keeps the prospect of an August interest rate cut on a knife edge, these figures should at the very least drive a more dovish vote split to signal that rate cuts are imminent.”
ENDS
Notes to editors:
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