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UK inflation fell to a low in July, with the central bank focusing on core and services inflation.

TraderKnows
TraderKnows
05-07

The UK's inflation rate expectation for July has dropped to its lowest since 2022, yet remains above the central bank's target, with the central bank focusing on core inflation and service sector prices.

Despite the Bank of England keeping an eye on signs of intensifying inflation, official data on Wednesday showed that the July inflation rate decelerated as anticipated, dropping to its lowest annual rate since February 2022. However, the inflation rate for services rose from 7.2% in June to 7.4%.

The UK's Office for National Statistics stated that the annual consumer price inflation rate decreased from 7.9% in June to 6.8%, a figure that aligns with earlier predictions from a survey conducted by the Bank of England and Reuters among economists.

Even though the inflation rate has diminished, it remains significantly above the Bank of England's 2% target. The UK continues to be one of the European countries with the highest price pressures. Among the countries that have released inflation data for July, only Iceland and Austria had inflation rates higher than the UK.

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The Bank of England is closely monitoring core inflation, which excludes the more volatile food and energy prices, to better understand consumer price index trends over time. Since food and energy prices are subject to sudden or seasonal changes, core inflation provides a more accurate reflection of inflation trends and potential directions, which most monetary policy authorities or central banks consider when devising monetary policies.

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Wiki

Inflation

Inflation refers to the phenomenon where the purchasing power of a country's (or region's) currency decreases, leading to a general rise in the prices of goods and services. It is reflected in the fact that, over a certain period, the same amount of money can only buy fewer goods and services.

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