UK June CPI +2.6% vs +2.7% y/y expected

UK June CPI +2.6% vs +2.7% y/y expected Prior +2.8% UK June core CPI +2.6% vs +2.5% y/y expected Prior +2.6% As expected, UK headline annual inflation eased in June but the real surprise in this report is that core annual inflation came in higher than estimated. That contrasts with analyst expectations, with some potential downside risks flagged prior the report release even. In terms of monthly estimates, headline inflation was up only 0.1% on the month but core inflation was seen up 0.3% (vs estimated 0.2%). Looking at the breakdown, food price inflation was slightly softer on the month (-0.2%) alongside transport (-0.3%). However, that is more than offset by travel-related spending with prices for restaurants and hotels up 1.0% and recreation and culture up 0.5% on the month. At the balance, goods price inflation was seen slowing to 1.7% in June - down from 2.0% in May. Meanwhile, services inflation only eased marginally to 3.6% in June from 3.7% in May. The latter in particular was estimated to fall to around 3.5%, so that is in some sense hotter than anticipated and contributed to the more stubborn core annual inflation figure. All in all, this will just keep BOE policymakers on their toes heading into the summer break. It is not time to rest on their laurels especially with energy prices set to rebound again in July, as the US-Iran conflict flares up again. And in that sense, the inflation outlook remains dicey as persistently high energy prices will eventually feed into other categories and broadens the risks of potential second round effects too. But that will be a conversation for another time in the future.