British inflation steadies as Brexit impact fades

Britain’s annual inflation rate steadied in July, with an expected rise failing to materialise as the pound recovers from a Brexit-fuelled slump, official data showed Tuesday.

The Consumer Prices Index (CPI) stood at 2.6 percent last month, the same level as June, the Office for National Statistics said in a statement.

The ONS added that lower motor fuel costs offset rising prices for clothing, food and household goods.

Analysts’ consensus forecast had been for an increase to 2.7 percent.

“The expected pick-up didn’t happen,” said Neil Wilson, analyst at trading firm ETX Capital.

“The sterling exchange rate has stabilised, meaning far less pass-through from the weaker pound on the inflation rate. We’re even getting to the stage in the year where the pound will be actually stronger than it was 12 months before, especially against the US dollar,” Wilson said.

The CPI measure had surged in May to a four-year peak at 2.9 percent, as the Brexit-hit pound raised import costs.

“It now looks quite possible inflation has peaked, and will fall back further in coming months,” noted Hargreaves Lansdown economist Ben Brettell.

“All this is good news for the consumer, as it helps alleviate the continuing squeeze on household finances, though pay is still shrinking in real terms for now.”

Wilson added that the data “cement the belief that a rate hike this year now looks highly unlikely” from the Bank of England.

The ONS will on Wednesday publish its latest unemployment data, which are widely expected to show that wage growth has failed to keep pace with inflation.