London: UK inflation may have slowed in July to the least in 2 1/2 years, moving closer to the Bank of England’s target as weak demand helped contain price pressure.
Consumer prices rose an annual 2.3 per cent last month, compared with a reading of 2.4 per cent in June, according to the median forecast of 35 economists surveyed by Bloomberg News. That would be the lowest since November 2009.
The Bank of England cut its gross-domestic-product forecast this week and sees inflation easing to below its 2 per cent goal next year, indicating there may be a need for more stimulus. Still, wheat, corn and oil prices have risen in the past month, which may slow the pace of price declines.
“Inflation should trend lower over the coming months, although the scope for further falls in the near term may be limited,” said Howard Archer, an economist at IHS Global Insight in London. “Crucially though, underlying price pressures are expected to be held down over the coming months by appreciable excess capacity, extended muted economic activity, and on-going wage moderation.”
The Office for National Statistics in London will publish the inflation data at 9:30am on August 14. A day later, the Bank of England will release the minutes of this month’s policy meeting, showing how officials voted when they kept their bond- purchase target on hold at 375 billion pounds ($584 billion).
The ONS also publishes unemployment data that day and retail sales figures on Aug. 16. Retail sales probably fell 0.1 per cent in July from June, according to a Bloomberg survey.
The Bank of England forecast on Aug. 8 that inflation will slow to 2 per cent by about the middle of next year and to about 1.6 per cent in two years. Producer-price inflation cooled to 1.7 per cent in July, the slowest since October 2009, the statistics office said yesterday.
Still, there may be upward pressure on food prices as droughts damage crops from the US to Russia. An index of 55 food items tracked by the United Nations’ Food & Agriculture Organization jumped 6.2 per cent in July from June, the biggest increase since November 2009.
While crude oil has fallen about 16 per cent from the year’s high closing price reached in late February, it has risen about 19 per cent since June 28, the lowest close this year.