- Inflation stays at Bank’s target of 2% in June
- Hotels and restaurants saw price increases, while falling clothing and footwear prices helped to keep inflation down last month
- Sticky services inflation came in unchanged at 5.7%
- Chance of a cut to interest rates by the Bank of England on 1 August hangs in balance
Laura Suter, director of personal finance at AJ Bell, comments on the latest UK inflation figures:
“Bank of England policymakers may be cursing Taylor Swift, as fans spending on hotel rooms and in restaurants during her Eras tour is likely to be one reason that prices rose in June, meaning that overall inflation flatlined at 2% rather than fell.
“A fall to 1.9% had been predicted but didn’t materialise, putting the decision about a potential interest rate cut on 1 August finely in the balance. The odds are around 50:50 as to whether we will see the first rate cut from the Bank of England next month – a move that would be welcomed by the public and the new government alike. All eyes will now be on tomorrow’s wage figures as a further indicator of whether the Bank will start its rate cutting cycle in a couple of weeks. But hot on the heels of strong GDP figures and a warning from the IMF that rates may have to stay higher for longer in the UK, some will be forecasting no cut this summer.
“The other thorn in the Bank of England’s side is services inflation, which also held firm at 5.7% in June – unchanged from the previous month. This sticky element of inflation is of big concern to the Bank and even a small drop in the right direction would have given more confidence that now is the right time for interest rate cuts.
“But there are some big bright spots for consumers. Food and alcohol prices rose by 1.5% in June, compared to 17.4% a year earlier, showing just how much food inflation has been tamed. The football effect is likely to have played a part in that, with supermarkets discounting alcohol and snacks to lure in more customers during the Euros.
“Clothing prices also fell, as there were more sales on the high street. This is likely the result of the dismal weather in the UK, meaning that fewer people are shopping for their summer wardrobe, leading to sales in shops.”
