UK July CPI +3.8% vs +3.7% y/y expected | investingLive
- Prior +3.6%
- Core CPI +3.8% vs +3.7% y/y expected
- Prior +3.7%
UK inflation comes in hotter than expected and this will reaffirm the BOE sentiment to pause in September. That said, markets had been pricing in ~94% odds of a pause already coming into today. As such, any material shifts in pricing would be rather limited. And that means the scope for any sterling upside is also likely to be capped. GBP/USD is now flat at 1.3490 on the day with large option expiries at 1.3500 in play as well.
Looking at the breakdown, annual services inflation was unchanged at 5.2% in July. But in core terms, that is seen up from 4.7% in June to 5.0% in July. This will continue to present a headache for the BOE as they are dealing with the very real threat of stagflation pressures now.
Besides that, transport prices were the biggest driver of the strong price readings in July. ONS attributes that to the timing of the school summer holidays, leading to higher airfares in particular.