22 July 2026
If you are covering the latest UK inflation data from the Office for National Statistics, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
"With Andy Burnham now at the helm, and a raft of fiscal policies expected this week, inflation has moderated for June, coming in at 2.6% and down from 2.8% in May. Much of this fall came as a result of a fall in petrol and diesel prices as energy costs dropped sharply in the wake of the ceasefire between the US and Iran, although that is now looking uncertain to remain the case as tensions remain high in the region.
"Burnham has said his newly formed government must be a 'cost of living government', meaning there is a lot of pressure on him and his colleagues to get inflation back down to the 2% target. Today he has targeted bus fares for consumers, but large packages of help, which would impact inflation significantly will be difficult given how much is out of his control and at the whims of events in the Middle East with energy prices. Indeed, taking VAT off household energy bills, which will marginally bring inflation down, risks being counteracted by a rise in the price cap come October.
"The good news for Burnham is that grocery inflation has slowed to its weakest rate since December 2024. However, with events in the Middle East still threatening to erupt back into a full-scale conflict as we saw earlier this year, this will continue to put pressure on the inflation rate. Some more fiscal jiggery pokery may be required to help keep it closer to target than it is now.
"What this means for the Bank of England is a continuation of its holding pattern until clearer signs from the Middle East emerge. One rate rise is still expected by the market, and should we see a further spike in gilt yields or inflation then more than that may be required. The UK's fiscal position remains a tightrope, and despite Burnham's noble desire for swift action, he may be reminded that the path for inflation may just tie his hands somewhat."
