DAVY VIEW

Headline inflation moderated to 2.6% for the UK in June, well below 3.1% last forecast by the Bank of England (BoE). Lower energy prices benefitted from last month’s ceasefire, though renewed war in the Middle East this month means higher energy inflation in July is assured. Services inflation moderated to 3.6%, and the BoE’s preferred measure of underlying services inflation was at its lowest since the start of 2022. This adds to dovish labour market results published yesterday. While no change to Bank Rate is likely at next week’s BoE meeting, another vote for a hike would not be a surprise.