22/07/2026
Reduction in Inflation....Are we back on Track!
Inflation fell from 2.8% in May to 2.6% in June, helped by lower transport and fuel costs.
However, an escalation in attacks in the Gulf, alongside the increase in the Ofgem price cap, threaten to push prices higher in the coming months.
Core inflation remained at 2.6% in June, highlighting persistent underlying price pressures, while services inflation eased only slightly and remains stickier than expected.
The Bank of England is still expected to hold rates steady this month, but policymakers will be watching geopolitical risks closely.
UK inflation has eased to 2.6% in June, with some of the heat coming out of rapidly rising prices, offering some short respite for households and pushing the threat of interest rate hikes a little further into the distance. The fall was steeper than some forecasts, but it's still above the bank's 2% target.
While the fall in the headline rate is welcome news, stubbornly high core inflation, a sluggish economy and the Middle East crisis are set to keep Bank of England policymakers on alert.
While inflation easing may seem like the first win of the new Burnham premiership, it’s more likely to be a false dawn as improving food and fuel prices mask what is still a really difficult picture.
All this means the Bank of England now has no reason to increase interest rates any time soon. It’s instead likely to watch and wait, and if inflation stabilises further it may hold off on making any rate rises at all this year.
Cue huge relief for the 1.8 million homeowners who are due to remortgage this year, as well as the thousands of first-time homebuyers who held off during the months of uncertainty.
This week's renewed fighting in the Gulf has led interest rate expectations to creep back up, but the confirmation that the jobs market is stable and inflation is settling are both wins for consumers and Britain’s fragile economy.
