There was some relief for policymakers at the Bank of England as inflation slowed more sharply than expected in June, falling to 7.9%
People shop at a market stalls in east London, Britain, January 23, 2021. REUTERS/Henry Nicholls/File PhotoUK still has higher inflation than many other countriesFactory gate prices rise by just 0.1% in 12 months to June
Sterling weakened and investors scaled back their bets on future increases in borrowing costs as consumer price inflation growth came in at its lowest since March 2022, although it remained above the rate in other big, rich economies. The BoE said in May it expected June inflation would fall to 7.9%, moving further away from October's 41-year high of 11.1% but still way above its 2% target.
Markets now reckon a quarter-percentage point rise in interest rates on Aug. 3 is likelier than the half-percentage point increase which had been priced in on Tuesday. Bank Rate was no longer seen peaking at 6%. British government bond prices soared and shares in home-builders jumped.
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