U.K. inflation hit a 14-month high on fuel and clothing costs in June, yet remained below expectations as slower growth in airfares and food prices curbed overall acceleration.
Inflation rose to 2.9 percent in June, the fastest since April 2012, from 2.7 percent in May, data from the Office for National Statistics showed Tuesday. But, it stayed marginally below the expected rate of 3 percent.
The Bank of England expects inflation to peak at around 3 percent in the third quarter this year. The outlook for both economy and inflation will be available at the Inflation Report, to be released on August 7.
At the July rate-setting meeting, the Monetary Policy Committee signaled the introduction of guidance on future interest rate path, most likely in August.
Looking ahead, Samuel Tombs at Capital Economics said it seems likely that June's inflation figure will represent 2013's peak. There is nothing in the latest inflation figures or outlook that should dissuade the MPC from pressing on with formal 'forward guidance' at next month's meeting, the economist said.
Today's below 3 percent inflation provides relief to the new BoE Chief Mark Carney from writing an open letter to Chancellor explaining high inflation.
The central bank has so far unveiled GBP 375 billion bond purchase programme and maintained a record low interest rate to support the economy.
The recent stream of good news on the U.K. economy has diluted the case for more Quantitative Easing in the near term at least, said Chief U.K. Economist at IHS Global Insight, Howard Archer. To this end, he expects BoE to formally adopt a policy of forward guidance on interest rates in August.
Month-on-month, consumer prices fell 0.2 percent in June, offsetting the 0.2 percent increase in the prior month.
CPIH, the new measure of consumer price inflation including owner occupiers' housing costs, grew 2.7 percent in June, up from 2.5 percent in May.
Consumer prices excluding energy, food, alcoholic beverages and tobacco, rose 2.3 percent annually, in line with forecast, but slightly faster than the 2.2 percent increase registered in May.
Motor fuels and clothing and footwear pushed up consumer prices higher, while the increase was limited by lower increases for air transport and food.
Retail price inflation, which is used in wage talks and as a basis for the inflation-linked bond market, also increased in June, to 3.3 percent from 3.1 percent in the previous month. But, it was down 0.2 percent from May.
Separate data showed that factory gate inflation increased more than expected in June. Factory gate inflation rose notably to 2 percent in June from 1.2 percent in May and exceeded the consensus forecast of 1.9 percent
Similarly, input price inflation accelerated to 4.2 percent, in line with estimates, from 1.8 percent in May.
On a monthly basis, output prices rose 0.1 percent in June compared with no change between April and May. At the same time, input prices were up 0.2 percent month-on-month in June following a 0.6 percent fall in May.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.