UK CPI YoY Actual 3.4% (Forecast 3.3%, Previous 3.5%)

UK CPI YoY Actual 3.4% (Forecast 3.3%, Previous 3.5%)

The latest Consumer Price Index (CPI) data for the United Kingdom shows a year-over-year (YoY) inflation rate of 3.4%, slightly above the forecast of 3.3% and down from the previous month's 3.5% [1]. This indicates a modest decrease in inflationary pressures, which could influence the Bank of England's (BOE) monetary policy decisions in the coming months.

The BOE is under increasing pressure to continue cutting interest rates, as recent economic data suggests a slowing economy and labor market. The latest figures show a contraction in the UK economy in April, driven by tariffs and a payroll tax hike, which have prompted businesses to slash jobs and wages [2]. This has led to a significant drop in employment and a slowdown in private-sector pay growth.

Market expectations have shifted, with the odds of a rate cut in August now at 80%, up from 40% at the start of June [2]. The BOE is expected to maintain rates at 4.25% this week, but there is a possibility of a dovish tilt in the minutes or a 6-3 vote split, which would encourage markets to fully price an August rate cut.

Inflation is expected to remain elevated due to temporary factors such as energy prices, but the BOE is confident that the 2% target will be hit by early 2027. However, officials are still alert to the possibility of "second-round effects" fueling wage demands and prices.

The latest CPI data provides further evidence that the UK economy is facing significant challenges, with inflation remaining above the BOE's target and the economy contracting in April. This suggests that the BOE may need to take more proactive measures to support the economy, potentially including additional interest rate cuts.

References:
[1] https://www.focus-economics.com/country-indicator/united-kingdom/inflation/
[2] https://www.bloomberg.com/news/articles/2025-06-16/dire-uk-data-ramp-up-pressure-on-boe-to-keep-cutting-rates