UK inflation held steady in June as price rises across the county stayed at the Bank of England’s target level for the second month running, spurring calls for a cut in borrowing costs.
The rate of Consumer Prices Index inflation remained unchanged at 2% in June, the Office for National Statistics (ONS) said.
It means that prices are still rising but at a rate that the central bank is comfortable with, after nearly three years of above-target inflation fuelling the cost-of-living crisis.
George Dibb, associate director for economic policy at the IPPR think tank, said: “Today’s data confirms that inflation is well on its way towards normalisation. Some inflation drivers, such as core inflation, are still elevated, but the Bank of England’s policy stance remains too tight. Interest rates have been too high for too long and need to come down to not hamper growth.
“The new government wants to boost the economy and to prevent inflationary pressures. Only investments in the clean energy transition can shield us from future inflation shocks in international oil and gas markets. Additionally, a record number of people have left the labour force, often due to illness, harming our economic potential. Addressing NHS failures will be critical to solving our dire labour market situation.”
The latest data showed that prices in restaurants and hotels rose more than a year ago, putting upward pressure on the headline inflation rate.
But prices of clothing and footwear fell last month, which helped bring down the overall rate.
Services CPI inflation – which looks only at services-related categories like hospitality and culture and is watched closely by the Bank’s interest rate-setters – was unchanged at 5.7% in June.
This could present a problem for the Bank after some economists had been expecting the rate to slow last month.
ONS chief executive Grant Fitzner said: “Hotel prices rose strongly, while second-hand car costs fell but by less than this time last year.
“However, these were offset by falling clothing prices, with widespread sales driving down their cost.
“Meanwhile, the cost of both raw materials and goods leaving factories fell on the month, though factory gate prices remain above where they were a year ago.”
Darren Jones, chief secretary to the Treasury, said: “It is welcome that inflation is at target, but we know that for families across Britain prices remain high.
“We face the legacy of 14 years of chaos and economic irresponsibility.
“That is why this Government is taking the tough decisions now to fix the foundations so we can rebuild Britain and make every part of Britain better off.”
This article was written by Anna Wise from The Independent and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.