DAVY VIEW

Although falling to 6.8% in July, a 17-month low, this morning’s UK CPI inflation figures are a little ahead of market expectations. The decline from 7.9% in June was anticipated, largely due to the new Ofgem energy price cap. However, core inflation was steady at 6.9% and accelerated to 7.4% in the services sector. Hence, following yesterday’s figures showing total pay growth rising to a record 8.2%, the CPI data will only reinforce the market’s view that the Bank of England will eventually raise rates to 6% in early 2024.