British Finance Minister Jeremy Hunt, in his assessment after the UK’s National Statistics Office (ONS) released inflation data for May today, said that inflation data strengthened the “government sticking to its guns to reduce inflation”.
Stating that they will not deviate from the course in the face of pressure, Hunt said, “If we are going to help families and alleviate the pressure on mortgages and businesses, we need to save the economy from every factor that causes high inflation. You can see that increases in interest rates in other countries bring inflation down over time. This will happen here too, but be patient. And we have to stick to our course.” he said.
According to ONS data, annual inflation in the UK remained stable at 8.7 percent in May, while core inflation rose to 7.1 percent.
ONS Chief Economist Grant Fitzner, in his evaluation of the data, stated that the price increases in airline tickets, second-hand vehicles, live music organizations and computer games led to an increase in inflation, and these increases were balanced by the decrease in oil prices.
Fitzner noted that despite the high course of food inflation, it showed a slackening this month.
25 bps increase guaranteed from BoE tomorrow, 50 bps probability strengthens
According to the analysis published by ING Think after the inflation data, 25 basis points of interest rate increase is seen as a guarantee at the Monetary Policy Committee meeting of the Bank of England (Boe) tomorrow due to the inflation that remains sticky in the country, while the data accelerated the possibility of a 50 basis point increase.
Core inflation, excluding energy and food prices, rose to 7.1 percent in May from a record 6.8 percent in April, creating a “shock effect”.
Due to persistent inflation, the BoE is expected to raise interest rates by 25 basis points again at its August meeting.
While ING Think predicts that inflation will fall below 7 percent as of July and to 4.5 percent by the end of the year, it expects core inflation to close the year above 5 percent.
According to Capital Economics, as the probability of a 50 basis point increase in interest rates for tomorrow’s meeting is getting stronger, the markets are pricing this increase.
Interest rates are expected to rise to 6 percent from the current 4.50 percent level by the end of the year.
The BoE, which has been tightening its monetary policy since December 2021 to reduce inflation, increased the policy rate to 4.50 percent last month by increasing interest rates 12 times in a row since that date.