UK June inflation rate rises above expectations, testing the path for interest rate cuts.

Jin10 data reported on July 16th that official data from the UK showed that the UK's June CPI year-on-year rate rose from 3.4% last month to 3.6%, exceeding expectations. The UK inflation rate has been steadily rising since hitting a three-year low of 1.7% in September last year. The Bank of England predicted in May that inflation would peak at 3.7% in September, almost double the target of 2%. Nevertheless, Bank of England Governor Bailey stated that due to weak labor market conditions putting downward pressure on wage growth and the bleak economic growth outlook, interest rates are likely to maintain a gradual downward trend. The Bank of England has cut rates four times since August last year, and a Reuters survey last month indicated that economists expect two more rate cuts this year (each by 25 basis points). However, some policymakers are concerned that skill mismatches in the labor market and other supply constraints will lead to excessive wage growth, making it difficult for inflation to return to target levels quickly.