Taylor Swift Holds Steady UK Inflation in June At ‘Knife Edge’ 2%

Inflation in the UK held steady at the Bank of England’s target rate of 2% in the year to June, according to the official data released on July 17. Though the inflation rate is enough for policymakers to cut interest rates next month, economists say Taylor Swift’s tour of the UK raised prices of restaurants and hotels, which kept the inflation at 2%.

The flat reading compared to June a year ago was a tad higher than expected. Most economists had anticipated a modest decline to 1.9 per cent.

According to the Office for National Statistics, the largest upward contribution to the annualised inflation rate came from restaurants and hotels. Some economists attributed the increases to Taylor Swift’s tour of the UK. The biggest downward contribution came from clothing and footwear, with widespread sales during the month.

In her ‘Eras Tour’, Taylor Swift was scheduled to perform 15 shows across four UK cities, including England, Wales, and Scotland, in June and August. Barclays projected an infusion of nearly $1 billion into the economy. Barclays also said fans likely allocated £121 ($153) towards accommodation, £111 ($140) for travel, and £59 ($74) for dining experiences around the venues.

The last time inflation was at 2% was in July 2021 before prices started to shoot up, first as a result of supply chain issues during the coronavirus pandemic and then because of Russia’s invasion of Ukraine, which pushed up energy costs.

“Today’s inflation report will keep the Bank of England’s August rate decision on a knife edge,” said Luke Bartholomew, deputy chief economist at asset management firm abrdn, formerly Aberdeen Asset Management. “More fundamentally, the ongoing stickiness of services inflation will leave the Bank wondering how long inflation will stay at the 2% target.”

Financial markets think it’s going to be a close call as to whether the Bank of England will reduce its main interest rate from 5.25% on August 1.

Some policymakers are still concerned over the scale of price rises in the crucial services sector and the pace of wage increases, which raise the risks of an inflation rebound if interest rates are cut too soon.

The Bank of England, like the US Fed and other central banks, raised interest rates aggressively in late 2021 from near zero to counter the rapid increase in inflation, which hit a peak of above 11% in late 2022.

Higher interest rates — which cool the economy by making it more expensive to borrow — have helped ease inflation, but they’ve also weighed on the British economy, which has barely grown since the pandemic rebound.

Prime Minister Keir Starmer has stressed that upping the UK’s economic growth will be the driving mission of his Labour government. Later Wednesday, his government will announce its plans for the coming year. Starmer said the measures announced in the King’s Speech to Parliament would “take the brakes off Britain” and “create wealth for people up and down the country” by spurring economic growth.

(With Inputs from Agencies)