While the UK economy has displayed resilience and improved growth prospects due to reduced energy costs, more predictable fiscal policies, and improved relations with European Union trading partners, persistent inflation levels pose a challenge. These inflationary pressures contribute to wage increases, making it unlikely for the Bank of England (BoE) to conclude its rate hikes or consider easing measures before mid-2024.
The euro area's current account remains in surplus; however, it experienced a significant decline in April. The decrease was primarily driven by a substantial reduction in the surplus for goods, which amounted to €16 billion, €25 billion lower than the previous month's figure.
Three nominees, including two Federal Reserve policymakers and an economist, expressed their commitment to reducing high inflation levels to restore sustainable growth in the US economy. Fed governor and vice-chair nominee Philip Jefferson acknowledged that inflation has started to subside, but the focus remains on achieving the 2% target.
In May, UK inflation surpassed expectations, with consumer prices rising by an annual 8.7%, remaining unchanged from the previous month. Economists surveyed by Reuters had anticipated a figure of 8.4%. On a monthly basis, headline Consumer Price Index (CPI) increased by 0.7%, while core inflation, which excludes volatile energy, food, alcohol, and tobacco prices, rose by an annual 7.1%, up from 6.8% in April and reaching the highest rate since March 1992.
The CPI figures will push the BOE into hiking rates further in a bid to control inflation, as both the chancellor and the BOE believe that interest rate hikes are the only way to control the inflation number.