British inflation fell to the Bank of England’s 2% target last month in an unexpectedly sharp slowdown that economists said was most likely a blip as the reopening of the economy after lockdown drives prices higher.
Economists polled by Reuters had expected Wednesday’s official data to show a 2.3% rise in consumer prices in July following a 2.5% rise in June.
Sterling showed little reaction to the figures as investors judged they were unlikely to alter the rising trend for inflation and would not sway Bank of England policymakers much.
Earlier this month the BoE said it expected to tighten monetary policy moderately over the next three years.
July’s slowdown in inflation reflected a jump in prices in the same month last year when Britain’s economy was emerging from its first coronavirus lockdown.
Prices of clothing and footwear and computers, games and toys also dragged on the rate of price growth last month, the Office for National Statistics said.
“The fall in year-on-year inflation last month masks the strength of inflationary pressures currently within the UK economy.”—Reuters