UK Inflation Edges Higher in July

In July, UK consumer price inflation increased to 2.2%, slightly below the predicted 2.3%. This follows two months at the Bank of England's 2% target. The BoE anticipates further rises, influenced by reduced energy price drop impacts. Meanwhile, sterling fell, and market eyes are on potential rate cuts.

In a surprising turn, British consumer price inflation ticked up to 2.2% in July, as revealed by official figures on Wednesday, marking the first rise of 2023. The increase, however, was marginally lower than the forecasted 2.3%, attributed to a slower rise in service prices.

The slight uptick comes after two months of inflation stability at the Bank of England's 2% target. The data's publication led to a sharp fall in sterling against the U.S. dollar, prompting financial markets to price in a 44% chance of a quarter-point rate cut by the BoE in September, up from 36% prior to the release.

BoE forecasts suggest CPI could reach 2.75% by the year's end as the impacts of falling energy prices in 2023 diminish. Finance officials stress that while inflationary pressures have dipped, they remain vigilant about long-term trends influenced by services prices and labor market conditions.

(With inputs from agencies.)