UK Inflation Expected to Rebound in July, BOE Outlook on the Line
The main economic focus in Europe today will be on inflation data, specifically the UK's Consumer Price Index (CPI) report. This release is particularly important as it will provide insight into how markets perceive the Bank of England's (BOE) outlook for the final few months of the year.
Headline annual inflation is estimated to rebound from 2.6% in June to 2.9% in July, with core annual inflation dipping slightly to 2.5%. The latter is expected to remain close to the BOE's own forecast of 2.55%.
The increase in headline inflation is attributed to a swing in energy prices, including the rise in the Ofgem price cap for Q3. This will likely boost energy price inflation and subsequently impact headline inflation.
Services inflation is expected to remain sticky but decline to 3.4% in July from 3.6% in June. Some analysts point to base effects in air fares, while others expect the government's Great British Summer savings policy to have a minimal impact on prices for recreational and catering services.