The UK’s latest figures for inflation have shown a sharper than expected fall in June to 7.9% amid speculation that the Bank of England may ease its monetary policy in the coming months.
In the latest CPI figures from the Office for National Statistics, the annual rate of inflation dropped further than forecasts had predicted. This has raised the prospect that interest rate hikes may start to ease, providing more long-term relief for people on mortgages.
Mortgage holders have faced increased pressure as fixed terms end and new interest rates of above 6% on average have compounded the cost of living crisis. However, with inflation cooling, the UK may have seen the worst of the inflationary effects on household budgets.
In the midterm, the Bank of England will have to balance other factors as the price of food remains stubbornly high and energy prices, although currently stable, could increase in the third quarter.
A number of factors that could lead to more prolonged inflation for the UK include a sudden rise in energy prices, extreme weather affecting supply and demand and the repercussions of the collapse of the UN-brokered Black Sea grain deal that has caused wheat prices to rise globally.
With the UK still facing among the highest inflation rates in the G20, the Bank of England is still far from getting inflation under control towards its 2% target.
