UK consumer prices rise beyond estimates on jump in airfare

Consumer prices in the United Kingdom rose beyond market estimates in June, largely driven by boost in airfares on trips to continental Europe.

The rate of inflation rose to 0.5 percent from 0.3 percent in May, data released by the Office for National Statistics showed Tuesday. Economists had expected 0.4 percent, according to the median estimate in a Bloomberg survey. Core inflation, which excludes volatile food and energy prices, strengthened to 1.4 percent.

In addition, airfares jumped 11 percent m/m in June, partly owing to the spectators who visited the Euro 2016 football championship in France, which saw England progress to the second round of the tournament before losing to Iceland.

Moreover, consumer price index (CPI)-led inflation rose 0.2 percent in June. Based on another measure, the retail price index (RPI) rose 0.4 percent on the month and 1.6 percent from a year earlier period.

Further, Bank of England policymakers surprised markets when they remained on hold at their monetary policy meeting last week. However, they have signaled a rate cut action in August, when they will also publish new growth and inflation forecasts.

Meanwhile, BoE officials said the sharp drop in the pound in the wake of the Brexit vote will put upward pressure on inflation in the short term, though they have differing views on the medium-term, Bloomberg reported.

In contrast, Martin Weale, a British economist said the nation’s improving wages coupled with weak underlying productivity growth, suggest that some inflationary pressures were starting to build prior to the referendum.