[ING: UK Begins to Feel the Impact of "Chip Inflation"] ING economist James Smith stated in a report that UK inflation is beginning to feel the effects of the global memory chip shortage, driven by surging demand for AI. Although overall inflation fell to a 15-month low in June, core inflation was slightly higher than expected. It appears that "chip inflation" has swept through the UK; portable device prices surged 22% month-on-month, the largest month-on-month change since the data series began in 2015. However, against the backdrop of cooling food and services inflation, the Bank of England seems unlikely to raise interest rates in the near term. We expect the Bank of England to keep interest rates unchanged throughout 2026, then consider a gradual rate cut starting next spring.
