UK inflation fell by more than expected in June to 2.6%, the the latest consumer prices index (CPI) data from the Office for National Statistics (ONS) reveals.
The data shows transport, food and non-alcoholic beverages made the largest downward contributions to the monthly change.
Today’s figures comes after inflation held steady and below forecasts at 2.8% in May.
Commenting on June’s data, Wealth Club chief investment strategic Susannah Streeter says: “The fall was steeper than some forecasts, but it’s still above the bank’s 2% target.”
“Also, it’s not likely to be long before the temperature rises again, with fresh attacks in the Middle East and the Black Sea threatening to keep prices on the boil. Brent crude has raced upwards again, to trade around $93 a barrel, the highest level in six weeks, and this snapshot of prices won’t capture this unwelcome development.”
Meanwhile, L&C Mortgages associate director David Hollingworth suggests today’s inflation figures “provide some reassurance following the uncertainty created by the ongoing strikes in Iran, which has seen several major lenders increase their fixed mortgage rates in recent days”.
Hollingworth adds: “The mortgage market had been moving in a positive direction, with lenders gradually reducing rates and giving borrowers improved choice. However, that downward momentum has ground to a halt, as uncertainty in financial markets has pushed lenders’ funding costs higher, prompting a growing number to increase their fixed-rate deals.”
“Today’s inflation figure is welcome news for borrowers, and the fall could take a little pressure off the Bank of England’s MPC to take immediate action to raise interest rates in the near term.”
Raymond James Wealth Management European strategist Jeremy Batstone-Carr comments: “The Bank’s MPC will note that today’s headline drop compares with the Bank’s own 3.1% forecast for June. This is seen as a welcome relief from the uncertainty surrounding the extent to which rising energy prices might penetrate higher prices and wages.”
“Today’s figures come hard on the heels of yesterday’s confirmation that domestic labour market conditions remain soft and average earnings growth remains contained. This provides further cheer to the majority on a still sharply divided policy committee.”
“This is not, however, time for complacency. Hostilities in the Persian Gulf and the continued blocking of commercial shipping through the Strait of Hormuz suggests that last month’s inflation hiatus will provide only temporary respite.”
“Price pressures are expected to intensify going forward, ensuring that the Bank of England remains vigilant. Financial markets are fully priced for a 0.25%-point rate hike before year-end and around 50% priced for another.”
