The year to June consumer price inflation stays at 2%. Services inflation remains solid, at 5.7%. Experts previously estimated that the figure would fall to 1.9%. Investors now doubt a Bank of England rate cut on August 1st Doubt enters an economist that Taylor Swift’s tour may have increased inflation.

UK inflation did not slow as expected and stuck at 2 per cent in the 12 months to June, while many economists had pencilled in a small slowdown to 1.9 per cent. Prices for services like hotels were high, with performances from stars such as Taylor Swift in the UK. It is a development that may make the job of the BoE more concerned about “stickier” prices.

Inflation and Its Effects

Inflation is an increase in the general price of goods and services. UK-wide inflation reached 2% this June. That means that, compared to the previous year, things are 2% more expensive. This is not as high as US and European inflation, but it still unsettles people. These were levels that the BoE was hoping to have surpassed by now.

What kept prices high was the fact that hotel prices had risen at a time famous singers were having tours in the UK, including Taylor Swift. Big events like concerts are known to draw people from far and wide, raising the cost of rooms among other accommodations. This raised higher-than-anticipated inflation.

Interest Rates Decision by BoE

Interest rates are important and influence the price at which credit is afforded to people. When the level of inflation is high, BoE might increase interest rates to reduce spending and, therefore, cool prices. However, when the rate is too low, they might cut the interest rates to encourage more spending.

Indeed, coming into the new data, there was almost a 50% chance of a rate cut. Those hopes were dashed, however, in the wake of the inflation numbers, with the probability of a rate cut tending down toward around 35%.

What This Means for You

Inflation affects everyone. The price increase makes things dearer. If the BoE does not cut interest rates, it will continue to be dear to borrow, thereby affecting loans and mortgages.

UK inflation stayed at 2% in the year to June, contrary to hopes that it would fall to 1.9%. The steady core inflation in June was partly due to the hike in hotel prices, with many famous singers, like Taylor Swift, touring in the UK. All these events drew more people traveling and staying in hotels, thus pushing the price up. Such a situation shows how special events could influence local prices and affect overall inflation.

Since such excess inflation sidelining, investors are now less convinced that the Bank of England will ease interest rates at its Aug. 1 policy meeting. Before the data, there was nearly a 50% chance of a rate cut, which has now dropped to about 35%. It is therefore incumbent upon the BoE to do the right thing, while considering what the current prices are doing to the economy and people. Having an inflation rate of 5 percent translates into expensive goods. And if interest rates are not cut by the BoE, then it would remain expensive to borrow, hence having effects on loans and mortgages