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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

UK CPI preview – will rapid price growth finally abate?

While underlying inflation remains a concern, headline consumer price inflation is expected to be brought down by softer petrol prices and lower energy bills, contributing to an overall decrease in inflation.

Chart Source: Bloomberg

​​​UK inflation expected to slow

​The latest figures from the Office for National Statistics (ONS) are expected to show that UK inflation is set to drop to its lowest level in over a year. In June, the rate of price growth is predicted to fall to 8.2%, down from 8.7% in May. This would be a reversal from previous expectations, as analysts had anticipated a decrease in the cost of living. However, it is worth noting that this figure is still higher than the Bank of England's (BoE) own forecast of 7.9% made in May.

​Despite the overall drop in inflation, there are indications that underlying price pressures remain persistent. Core inflation, which excludes volatile food and energy prices and is considered a more accurate indicator of price dynamics, is forecasted to remain steady at 7.1% in June. Services inflation, an area closely watched by the central bank for informing its interest rate decisions, is also expected to remain high at around 7%.

​More rate hikes needed

​The sustained high levels of underlying inflation are likely to raise concerns among members of the BoE's monetary policy committee. These levels suggest that price increases are being driven by local factors, which could put pressure on the central bank to continue raising interest rates. Analysts predict that the Bank may increase borrowing costs from the current level of 5% to a peak of approximately 6.25%.

​It is worth noting that while underlying inflation remains a concern, headline consumer price inflation is expected to be brought down by softer petrol prices and lower energy bills. These factors will contribute to a decrease in overall inflation.

​In other news, the ONS is set to release figures on Friday that are likely to show a slight increase of 0.1% in retail sales for the month of June, attributed to the warmer weather. However, over the past year, retail sales have dropped by 1.5%.

​Overall, these figures suggest a complex economic landscape for the UK, with a drop in overall inflation, but persistent underlying price pressures that may necessitate further interest rate hikes by the BoE.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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