UK inflation reached the Bank of England’s 2% target for the first time in nearly three years, offering some relief to markets. The Office for National Statistics (ONS) reported that the Consumer Prices Index (CPI) fell from 2.3% in April, with inflation holding steady on a month-on-month basis, compared to a 0.3% increase last month. Although prices continue to rise, the pace is the slowest since July 2021, largely due to a slowdown in price increases for food, soft drinks, recreation, culture, and household goods.
On a relatively quiet day for markets, as Wall Street was closed for Juneteenth, London’s FTSE 100 edged up by 0.2%. Meanwhile, Germany’s DAX dipped by 0.3%, and France’s CAC fell by 0.7% after the European Union criticised France for its rising debt levels. The broader STOXX 600 across Europe declined slightly by 0.1%. The pound also gained 0.2% against the US dollar, trading at 1.2725.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted that while the drop in UK inflation was anticipated, it had minimal impact on London-listed stocks. She mentioned that the inflation report suggests prices in the services sector remain high, indicating that a potential rate cut by the Bank of England may be delayed until the Autumn. Similarly, US Federal Reserve policymakers are maintaining a cautious stance on the likelihood of interest rate cuts.
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