The rise in CPI inflation from 2.1% in May to 2.5% in June was smaller than the leap in US inflation to 5.4% released yesterday, but we think the gap between the two will shrink as inflation in the UK climbs to around 4.0% by the end of the year. That said, as we suspect that the spike in UK inflation will be short-lived, we don’t expect the Bank of England to tighten policy anytime soon.
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