Adios, BoE rate hike?

U.K. inflation slowed notably in June, official data confirmed Wednesday, sending the pound to an eight-month low against the dollar as bets on a near-term rate hike from the Bank of England fade and investors sift through the brewing political chaos surrounding the country's exit from the European Union.

Britain's Office for National Statistics said consumer prices were 2.4% higher on an annual basis last month, a figure that fell short of the consensus forecast of 2.6%. That slide comes even as motor fuel prices hit a near four-year high, thanks to the surge in global crude prices, suggesting underlying pricing strength is starting to erode amid the uncertainty over the country's post-EU future.

"Consumers have been feeling the benefit of the summer clothing sales, and computer game prices have also fallen. However, gas and electricity, and petrol prices all rose, with consumers seeing the highest price at the pump for nearly four years, with inflation remaining steady overall," said ONS statistician Mike Hardie. "House prices rose at their slowest pace in nearly five years due to slower annual growth in the south and east of England. However, this was partially offset by the buoyant property market in the Midlands."

The pound fell sharply against the dollar following the release, retreating 0.54% to 1.3021, the lowest since November 3 and extending its recent slump to around 9.5% from its April peak. 

The pound has fallen as Prime Minister May continues to push a so-called "hard Brexit" option for leaving the European Union next year in order to tame the vocal anti-EU faction in her fragile coalition government. That view was cemented late Tuesday when May won the narrowest of Parliamentary victories that look to have thwarted the risk of a leadership challenge and fresh national elections, but at the same time increase the changes the Britain will crash out of the EU in March of next year without a trade agreement with Brussels. 

Bank of England Governor Mark Carney, who has consistently warned that personal debt levels and the falling pound are significant risks to the U.K. economy that need small rate increases to keep in check, has been reluctant to follow-though on that pledge given the country's political chaos and the rising chances of a hard Brexit outcome from the current government. 

"Our job is to make sure we are as prepared as possible," Carney told lawmakers yesterday. "Speaking very narrowly about the financial services side, in the event of a no-deal scenario ... there would be big economic consequences."