Drop in UK Inflation Seen Temporary, Still Set For 3% -- Market Talk

Features Dow Jones Newswires

1140 GMT - U.K. annual CPI inflation dropped to 2.6% in June, from 2.9% in May, but analysts warn inflation is still set to rise above 3% later in the year, even though signs of a weakening economy mean the Bank of England will probably not raise rates in coming months. "Despite this month's blip, inflation is heading towards 3% y/y," RBC says in a note. High inflation means the BOE's Monetary Policy Committee faces a "difficult balancing act," but RBC thinks weak economic data will prevent it raising rates. Investec also sees inflation rising towards 3% later in 2017. "We suspect that we have not yet seen the full effect of sterling's post-Brexit vote decline on headline inflation." (jessica.fleetham@wsj.com)

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July 18, 2017 07:55 ET (11:55 GMT)