UK Inflation Rate Holds Steady as Pound's Effects Fade

The UK inflation rate held steady in July at 2.6 percent year-over-year, missing economists' forecasts of 2.7 percent. The Office for National Statistics attributed this to lower oil prices and the fading effects of the pound's drop after the Brexit vote a year ago.

Economists had previously forecasted that inflation would accelerate to 3 percent due to sterling's 13 percent decline since the UK voted to leave the EU, but with oil prices down this year, they now expect price growth to remain below that target.

The report supports Bank of England Governor Mark Carney's case for waiting to raise interest rates from a record-low 0.25 percent, even as inflation breaches the 2 percent target. Just two BOE policymakers voted to increase the key rate this month.

According to James Smith at ING in London, 'While today's data will continue to test the patience of some BOE hawks, we expect the committee as a whole to continue looking through inflation spikes in favor of slower growth.' He does not expect a rate hike this year.