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U.K. Inflation Returns to BOE Target on Air Fares, Car Prices
Wednesday, 19 June 2019 15:53 WIB | ECONOMY |UK Inflation

Falling air fares and car prices saw U.K. inflation return to the Bank of England™s target last month.

Consumer prices rose 2% from a year earlier, down from 2.1% in April, the Office for National Statistics said Wednesday. Core inflation slowed to 1.7% from 1.8%.

Air fares, which surged in an Easter-related boost in April, fell 5.2% in May compared with a 10% increase a year earlier. Vehicle prices declined 0.3%, and there was also downward pressure from the cost of auto fuel, which rose less than it did last May.

Upward pressures came from rising prices for games, toys, hobbies, furniture and accommodation.

The BOE expects inflation to fall back below target this year, giving officials breathing space to keep interest rates on hold amid the continuing uncertainty over Brexit. Policy makers will announce their latest decision at noon on Thursday.

While the labor market remains tight, growth in the wider economy is slowing sharply as the first-quarter boost from stockpiling evaporates.

Inflation in the services sector, seen as a proxy for domestically generated inflation, slowed to 2.6% in May from 2.9% in April, while goods-price inflation edged up to 1.5%.

Other figures showed pipeline pressures remained subdued, with producer input prices rising just 1.3% from a year earlier, the weakest reading in three years. Cheaper oil drove the slowdown. Output prices gained 1.8%, also the least since 2016.

House prices in England and Wales rose an annual 1.4% in April amid concerns over Brexit and higher property taxes. In London, they fell 1.2%. Prices rose on the month, however, in a sign the property market may be stabilizing.

Wales was the strongest U.K. region, with house prices up 6.7% on the year, the biggest increase since 2014.

Source : Bloomberg

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