Mark Carney off the hook as inflation rise is less than expected
Experts say June figure will represent peak and is likely to fall back to 2 per cent target by end of year
Tuesday 16 July 2013
Bank of England Governor Mark Carney today avoided an embarrassing letter to explain away soaring prices just weeks into his new job after a smaller-than-feared rise in the cost of living during June.
The Consumer Prices Index rose further above the Bank’s 2% target last month, increasing from 2.7% to 2.9% as higher petrol costs contrasted with steep falls a year earlier, and clothing stores cut prices less sharply than last year.
Inflation remains at a 14-month high, but is still below the 3.1% level at which the Governor is forced to write an open letter to the Chancellor to explain the rise. The increase was lower than City economists had expected, sending the pound down towards $1.50 against the dollar and edging gilt prices higher as traders bet that Carney has more room to fire up the economy with additional money-printing. He is also expected to introduce guidance on interest rates in August.
Berenberg chief economist Rob Wood said: “Presentationally, the surprise today is more important. With no letter required, it makes it marginally easier to introduce more formal forward guidance at the next policy meeting.”
The Office for National Statistics’ figures showed petrol prices up 1p a litre to £1.34 in June, against a 4.3p fall a year earlier. Retailers last year slashed prices by a record 4.2% amid panic over wet weather, but last month discounts were a shallower 1.9%.
However, the cost of living is still more than double the average rise in UK wages, delivering a real-terms pay cut for millions. Oil prices have pushed higher amid Egyptian turmoil, and the pound has also lost ground against the dollar, pushing up input costs and factory gate prices for manufacturers.
Moody’s Analytics’ Melanie Bowler said: “Households are particularly sensitive to rising petrol prices, which could follow the recent rise in Brent crude. Further depreciation of the pound also risks importing higher prices, as dollar-denominated commodities become more expensive.”
Carney’s better run of economic news looks likely to continue next week with the British economy on course for growth of around 0.6% between April and June.
- 1 The political parties aren't all the same – which means 2015 will be a 'big-choice' election
- 2 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 3 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 4 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
UK weather: Warning for more snow and ice as freezing temperatures and gales hit Britain
New York police shooting: thousands turn out for the funeral of Rafael Ramos
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
£40000 - £43000 per annum + benefits: Ashdown Group: Senior Marketing Executiv...
£40000 - £43000 per annum + benefits: Ashdown Group: An international organisa...
£25000 - £30000 per annum: Ashdown Group: Internal Recruiter -Rugby, Warwicksh...