UK inflation cools faster than expected to 2.6% in June as food and fuel prices drop – business live

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Businesses are not optimistic that a slowdown in inflation will last. Martin Sartorius, lead economist at the Confederation of British Industry (CBI), predicts that inflation will ramp up over the coming months.

We expect this easing will prove temporary. Inflationary pressures are likely to firm over the next few months, reflecting the ongoing impact of the Iran conflict on energy bills and some passthrough to domestic prices. Renewed tensions in the Middle East mean that households and businesses will continue to face an uncertain and volatile outlook as we head towards autumn.

We anticipate the Bank of England’s Monetary Policy Committee to keep interest rates unchanged when it meets next week, as it maintains a ‘wait and see’ approach to the economy. Although risks remain elevated, a loosening labour market, soft domestic activity, and tighter financial conditions mean that the Committee is unlikely to raise rates in the near term.

June’s slowdown is a false dawn as it may have already been reversed this month with higher energy bills, following Ofgem’s energy price cap rise, likely to have lifted inflation above 3%.

Though stubborn services and core inflation suggest that the UK remains exposed to the inflationary fallout from the Iran war, weaker wage growth and a sluggish economy will help blunt any second‑round effects.

Falling inflation is news families want to hear but there is much more to do to give people the breathing space they need.

That is why yesterday we cut VAT on electricity bills and today we’re announcing a £2 cap on bus fares from January. We have chosen to focus on the cost of living in our first week, signalling that concern for working people will be at the heart of everything we do.