UK inflation rate rose higher than expected in June, putting the rate cut path to the test.

Official data from the UK on Wednesday showed that the UK's June CPI annual rate increased from 3.4% last month to 3.6%, higher than expected. The UK inflation rate has been steadily rising since hitting a three-year low of 1.7% in September last year, with the Bank of England forecasting inflation to peak at 3.7% in September, almost twice the target of 2%. However, Bank of England Governor Bailey stated that due to weakness in the labor market putting downward pressure on wage growth, and with the economic growth outlook still dim, interest rates are likely to continue their gradual downward trend. The Bank of England has cut interest rates four times since August last year, with a Reuters survey last month indicating economists expect two more rate cuts this year. However, some policymakers are concerned that skill mismatches in the labor market and other supply constraints may lead to excessive wage growth, preventing inflation from returning to target levels quickly.