UK CPI Hits 40-Year High in June as BoE's Bailey Says 50 BP Hike is 'On the Table'

UK inflation hit its highest level in 40 years in June, with large monthly increases in CPI which is signaling continued strong price pressures.

Consumer prices rose by 0.8% mom, slightly above expectations of 0.7%, and the annual rate rose to 9.4% from 9.1%. Excluding volatile food and energy components, the 'core CPI' rose by 0.4%, slightly less than forecast, and the annual rate fell to 5.8% from 5.9%. However, the retail price index, which includes large regular expenditures such as mortgage interest and council tax, rose by 0.9%, bringing the annual rate to 11.8%. At the producer level, ex-factory prices moderated somewhat, but rose less than expected, rising by 1.4% mom. Thus, annual producer price inflation rose to 16.5% from 15.8% in May. May's figures were also revised higher. The figures put fresh pressure on the Bank of England to raise interest rates more aggressively, despite the marked slowdown in the UK economy in recent months, when consumer confidence has collapsed and earnings of domestic consumer-facing companies have been cut. It came just hours after Bank of England Governor Andrew Bailey admitted that the Bank would discuss raising the key refinancing rate by 50 basis points at its next meeting on August 4th. In his traditional 'Mansion House' speech, Bailey said that "a 50 basis point increase at our next meeting will be among the options on the table" and also discussed the possibility of a faster reduction in the Bank's balance sheet. Sterling weakened on the news and traded just below $1.2000, down about 0.3%.