UK annual inflation drops under eight percent

LONDON: Britain’s annual inflation rate dropped below eight percent in June, official data revealed Wednesday, as consumer prices rose slower than forecast, easing the country’s cost-of-living crisis.

The Consumer Prices Index rose by an annual rate of 7.9 percent, down from 8.7 percent in May as food price inflation eased, the Office for National Statistics said in a statement.

It was the lowest level since March 2022, while analysts’ consensus forecast had been for a drop to 8.2 percent. The UK rate remains the highest among G7 nations.

The data sent the British pound sliding against the dollar and euro, although the Bank of England is expected to keep on raising interest rates to combat elevated prices.

“Food price inflation eased slightly this (June) month, although it remains at very high levels,” ONS chief economist Grant Fitzner said in the release.

He added that although manufacturing costs remained elevated, “the pace of growth has fallen across the last year”.

Finance minister Jeremy Hunt noted in a separate statement that “high prices are still a huge worry for families and businesses.

“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.”

Prime Minister Rishi Sunak has set a target of reducing inflation to five percent by the end of 2023.

In a bid to cool prices, the Bank of England has ramped up interest rates 13 times in a row to the current level of five percent.

The move has sparked mortgage turmoil as commercial lenders lift their own rates on home loans, worsening a cost-of-living crisis.

Following Wednesday’s data, the pound dropped under $1.30 “as softer inflation tempered Bank of England hawks”, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“But even with a softer-than-expected figure, inflation in Britain remains high and stickier than in other Western economies, and that keeps odds for further BoE action” on raising rates.