UK's rising domestic inflationary pressures

Even though inflation fell back to zero in June, underlying domestic inflation pressures are rising. 

Firstly, in its latest Inflation Report, the BoE estimated the output gap at 0.5% of GDP and expected it to close in a year.

Secondly, there have been signs recently that earnings growth is gathering steam. 

"However, the improvement in productivity seen over the last quarters, if sustained, could limit the impact of higher wage growth on unit labour costs and hence on inflation", says Societe Generale.