U.K. headline inflation remained stable in June, core rate accelerates slightly

The U.K. headline inflation remained steady in the month of June. On a year-on-year basis, the consumer price inflation came in at 2 percent, consistent with the consensus expectations. The core inflation rate, which excludes energy, food, alcohol and tobacco, accelerated to 1.8 percent year-on-year from 1.7 percent, reflecting a small drop in clothing and footwear prices in June 2019.

Still, this was also as expected and countered downward effects in both food and energy prices to keep the headline measure of CPI the same. Significantly, the outturn for CPI was consistent with the Bank of England’s forecast from its May inflation report and therefore has little implication for the U.K. policy outlook, noted Lloyds Bank.

However, the RPI (retail price index) measure of inflation slowed down in June, easing to 2.9 percent from 3 percent previously, reflecting a combination of weaker house price growth and differences in weights for several categories relative to CPI. On the latter, a weaker rise in airfares in June relative to in 2018 signified that the downward influence on the RPI was greater than in the CPI, given the higher weight of airfares in the RPI basket compared to the CPI.

In the meantime, different methodologies around capturing petrol/diesel prices in the two inflation measures signified that fuel prices dropped by more in the RPI than in the CPI. Furthermore, the pace of housing depreciation slowed last month, reflecting weaker house price growth.

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