UK Inflation Holds Steady at 2.0%, Defying Forecasts

British inflation remained at 2.0% last month, contrary to expectations of a slight decrease. The Office for National Statistics reported persistently strong services inflation at 5.7%. The Bank of England faces uncertainty regarding its first interest rate cut since 2020, with core inflation also holding steady at 3.5%.

British inflation held steady at 2.0% in June, defying forecasts for a slight dip, Reuters reports. Contrary to economist expectations for a 1.9% inflation rate, inflation pressures remain strong, particularly in the services sector, which saw a rate of 5.7%—unchanged from May.

The rise in sterling against the dollar followed the latest data, with focus turning to the Bank of England's next interest rate decision due on August 1. With core inflation excluding food and energy at 3.5%, analysts estimate a roughly 50% chance of an interest rate cut—potentially the first since 2020.

The speculation comes amid wage growth that continues to push inflation above the target rate, raising concerns for policymakers. The latest inflation figures pose a challenge for new Prime Minister Keir Starmer and finance minister Rachel Reeves, aiming to rejuvenate the British economy after their recent election victory.