Month-on-month inflation fell 0.4% in July, reversing rises seen in July. It’s good news for Prime Minister Rishi Sunak, who promised to cut inflation, although many financial experts argue that it has little to do with actions taken by Downing Street.
Other statistics show:
- Annualised inflation slowed to 6.8%, from 7.9% in June, the lowest it’s been since February 2022.
- Annualised inflation was forecast to come in at 6.8% (Trading Economics).
- Core Inflation rose 6.9% in the 12 months to July 2023, unchanged from June.
Finance and wealth experts are warning that it isn’t time to relax yet.
Nicholas Hyett, Investment Manager, Wealth Club, said:
“Put falling inflation together with strong wage growth, and, for the first time in a long-time, salaries are going up faster than prices. The most recent set of GDP numbers saw economic growth beating expectations too, and you’d be forgiven for thinking the economic crunch is over.
But unfortunately the fall in headline inflation has been driven by lower energy and food prices – very welcome, but outside the Bank of England’s control. Core inflation, which covers inflation generated within the UK economy remains unchanged month-on-month and at 6.9% is still way above the Bank’s 2% target. Further interest rate rises shouldn’t be ruled out.
Past interest rate rises haven’t had their full effect on the economy yet either.
The average interest rate people are paying on mortgages is 2.92%. But the cost of the average 2-year tracker sits at 6.18%. That means most people haven’t yet felt the interest rate squeeze in full, and it’s only when historic fixed rates roll off that we’ll really know the full extent of the economic pain rate rises have inflicted.
Economic data has given us a lot to like recently, but we’re not out of the woods yet.”
