Bankinter | CPI (July): 3.8% year-on-year versus 3.7% expected and 3.6% previously. Underlying: 3.8% versus 3.7% expected and previously.
Bankinter analysis team’s view: Inflation remains high, pressured by services (+ 5.0% versus 4.8% expected and 4.7% previously) and complicates the BoE’s position, which faces a cooling economy and labour market in an environment of high prices. Inflationary pressures have increased in recent months, reaching 3.8% in July versus 2.6% in March. The BoE expects this trend to continue until September, reaching 4% and then moderating, although more slowly than initially expected, with the return to the BoE’s target of 2% delayed until Q3 2027 (versus 2Q2027 previously). The BoE will maintain its path of monetary easing, but in a gradual and cautious manner due to the current uncertainty (increased trade tensions with the US and a possible tax hike included in Rachel Reeves’ tax reform). The unemployment rate stood at 4.7% in June 2025 versus 4.2% in the same month of 2024.
