19 June 2024
If you are covering the latest UK inflation data, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“After a long and arduous period, UK inflation has finally returned to the coveted 2% target set by the Bank of England. Given inflation peaked at 11% two years ago, this is a big occasion for a UK economy that appeared blighted by inflation worse than comparable peers. That said, it is possible this joy will be short-lived. Much of the fall in recent months has been driven by the energy price cap, as well as food prices, which will be a diminishing factor in future months and so we expect inflation to go up again later this year and settle into a trajectory between 2% and 3%.
“Furthermore, this is not necessarily job done and victory declared for the Bank of England. The cost of living crisis persists and with wage inflation beginning to slow and prices in many areas of the economy still increasing faster than the headline rate, many won’t feel better off purely because inflation has hit 2%. This milestone being reached also does not mean a rate cut is coming tomorrow – much to the chagrin of the Conservative party. Sticky core inflation, which strips out volatile food and energy prices, seems likely to continue giving the BoE pause for thought. As such, the tail end of the summer, by which time wage inflation looks likely to further ease, seems far more likely timing for the first rate cut and the beginning of some relief for consumers and businesses.”
