UK inflation rate slides to 7.9% in June, below expectations

cnbc.com:

LONDON — U.K. inflation cooled significantly in June, coming in below consensus expectations at 7.9% annually.

Economists polled by Reuters had projected an annual rise in the headline consumer price index of 8.2%, following May's hotter-than-expected 8.7% reading, but annualized price rises continue to run well above the Bank of England's 2% target.

On a monthly basis, headline CPI increased by 0.1%, below a consensus forecast of 0.4%. Core inflation — which excludes volatile energy, food, alcohol and tobacco prices — remained sticky at an annualized 6.9%, but fell from a 31-year high of 7.1% in May.

Falling prices for motor fuel made the largest downward contributions to the monthly change in the CPI annual rate, the Office for National Statistics said Wednesday. Food prices rose in June, but by less than in the same period of last year.

«There were no large offsetting upward contributions to the change in the rate,» the ONS added.

Sterling slid 0.6% against the dollar on Wednesday, hovering around $1.296 as of 7:50 a.m. London time.

Chief Secretary to the Treasury John Glen told CNBC on Wednesday that the larger-than-expected decline in the inflation rate was «very encouraging.»

«But there's no complacency here in the Treasury,» he added. «We're working closely in lockstep with the Bank of England as we try to halve it this year and get it down to its long term norm of 2%.»

The U.K. has endured persistently high inflation that both the government and the Bank of England have warned could become entrenched in the economy, as a cost-of-living crisis and a tight labor market fuel wage price increases.

Bank of England Governor Andrew Bailey and U.K. Finance Minister Jeremy Hunt told an audience in the City of London