UK CPI June: Headline inflation expected to ease from May's 8.7%, core seen dipping. Barclays flags transport and holidays as drivers. Report unlikely to shift BOE outlook, with 40 bps of hikes priced by year-end.
The UK CPI report for June lands at 0600 GMT Wednesday, the only scheduled data of note for European trading. Economists expect headline annual inflation to ease from May's 8.7%.
The expected decline in the headline number is largely tied to lower petrol and diesel prices at the pump. Core inflation is forecast to dip. Barclays analysts said transport services and package holidays are the key components driving the deceleration. Several analysts also pointed to volatile airfares as a potential negative drag.
The data is unlikely to shift the Bank of England's outlook on its own. The central bank faces renewed tensions from the US-Iran conflict, which complicate the inflation picture through energy costs. ING said inflation will rise in July as household energy bill hikes kick in. The bank still expects it to peak below 3.5% this summer. Analysts said the BOE will not be able to take too much comfort from the June figures given the upside risks from energy prices.
Market pricing reflects roughly 40 basis points of rate hikes from the BOE by year-end, according to swaps data. The first full 25-basis-point move is not fully priced until November.
Traders will watch for any upside surprise that could bring forward rate hike expectations. For a broader view on how rate differentials are shifting across currencies, see the forex market analysis page and the GBP/USD profile.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.