Aswat Asharq Al-Awsat :

Aswat Asharq Al-Awsat : UK Inflation Back to 2% Target for 1st Time Since 2021

FILE PHOTO: Prices of food are displayed at the Borough Market as the UK inflation rates fall by less than expected in London, Britain May 22, 2024. REUTERS/Maja Smiejkowska/File Photo
FILE PHOTO: Prices of food are displayed at the Borough Market as the UK inflation rates fall by less than expected in London, Britain May 22, 2024. REUTERS/Maja Smiejkowska/File Photo
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UK Inflation Back to 2% Target for 1st Time Since 2021

FILE PHOTO: Prices of food are displayed at the Borough Market as the UK inflation rates fall by less than expected in London, Britain May 22, 2024. REUTERS/Maja Smiejkowska/File Photo
FILE PHOTO: Prices of food are displayed at the Borough Market as the UK inflation rates fall by less than expected in London, Britain May 22, 2024. REUTERS/Maja Smiejkowska/File Photo

British inflation returned to its 2% target in May for the first time in nearly three years, data showed on Wednesday, but underlying price pressures remained strong, meaning the Bank of England is likely to wait longer before cutting interest rates.
While the fall in headline inflation in May will be welcomed by both Prime Minister Rishi Sunak and the BoE, it is likely to have come too late either to turn around Sunak's fortunes at next month's election or to prompt a BoE rate cut on Thursday.
The Office for National Statistics data showed services price inflation, which the BoE thinks gives a better picture of medium-term inflation risks, was 5.7%, Reuters reported. That was down from 5.9% in April but not as big a drop as the 5.5% economists had forecast in a Reuters poll.
Sterling rose modestly against the US dollar and the euro after the data.
"(BoE) Governor (Andrew) Bailey is likely to be the happiest man in the Square Mile this morning," said Michael Brown, senior research strategist at currency brokers Pepperstone, but added the BoE was likely to wait until August before cutting rates.

The drop in annual consumer price inflation from April's 2.3% reading - in line with economists' expectations - took it to its lowest since July 2021 and marks a sharp decline from the 41-year high of 11.1% in October 2022.

The fall has been sharper than in the euro zone or the United States, where consumer price inflation in May was 2.6% and 3.3% respectively, belying concerns a year ago that British inflation was proving unusually sticky.
Inflation first began to pick up in most Western economies in the second half of 2021 due to bottlenecks from the COVID-19 pandemic, then surged after Russia's full-scale invasion of Ukraine in February 2022 caused natural gas prices to soar.

Consumer prices in Britain are up around 20% over the past three years, squeezing living standards and contributing to the unpopularity of Sunak's Conservatives, who are around 20 points behind the opposition Labour Party in opinion polls.

Sunak said in a video clip that the drop in inflation since he took over from his Conservative predecessor Liz Truss - whose fiscal policy triggered a surge in government borrowing costs - was evidence that his economic policies were working.

"Let's not put all that progress at risk with Labour," he said.

Rachel Reeves, the Labour lawmaker who looks set to be Britain's next finance minister after the July 4 election, said the Conservatives would bring "five more years of chaos".



Aswat Asharq Al-Awsat : Oil Rises as US Inflation Eases

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Rises as US Inflation Eases

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil prices rose on Friday amid signs of easing inflationary pressures in the United States, the world's biggest oil consumer, with Brent crude peaking above $86 though it was still set for a weekly decline.
Brent crude futures rose 72 cents, or 0.8%, to $86.12 a barrel by 0819 GMT. US West Texas Intermediate crude futures climbed 85 cents, or 1%, to $83.47 a barrel. Both contracts gained in the prior two sessions, Reuters reported.
Brent futures were set to fall about 1% week-on-week following four weekly gains. WTI futures were broadly stable on a weekly basis.
Investor confidence was bolstered after data on Thursday showed US consumer prices fell in June, stoking hopes that the Federal Reserve will cut interest rates soon.
Lower rates are expected to boost economic growth, which would help raise fuel consumption.
The market, however, is still awaiting clearer signs of action. While Fed Chair Jerome Powell acknowledged the recent improving trend in price pressures, he told lawmakers that more data was needed to strengthen the case for rate cuts.
"Cooling US inflation numbers may support the case for the Fed to kick-start its policy easing process earlier rather than later, but it also adds to the series of downside surprises in US economic data, which points to a clear weakening of the US economy," said Yeap Jun Rong, market strategist at IG.
Indications of strong summer fuel demand in the US also supported prices.
US gasoline demand was at 9.4 million barrels per day (bpd) in the week ended July 5, the highest since 2019 for the week that includes the Independence Day holiday, government data showed on Wednesday. Jet fuel demand on a four-week average basis was at its strongest since January 2020.
"The market will remain rangebound, paralyzed by opposing forces of expected demand recovery fueled by an anticipation of a strong summer for fuels consumption ... but sentiment remains pegged by ongoing economic weakness and uncertain demand recovery," said Emril Jamil, senior oil analyst at LSEG.
The strong fuel demand encouraged US refiners to ramp up activity and draw from crude oil stockpiles. US Gulf Coast refiners' net input of crude rose last week to more than 9.4 million bpd for the first time since January 2019, government data showed.
But weaker demand signs from China, the world's biggest oil importer, could counter the outlook from the US and weigh on prices.
"The recent downside correction is evidently over, although the speed of further ascent might be hindered by falling Chinese crude oil imports, which plummeted 11% in June from the previous year," said Tamas Varga of oil broker PVM.