UK inflation has fallen to its lowest level since March 2022, according to data released by the Office for National Statistics (ONS). Specifically, the Consumer Prices Index rose by 7.9% in the 12 months to June 2023, down from 8.7% in May and significantly lower than October 2022’s peak of 11.1%.
The easing of transport division prices— particularly the reduction in motor fuel costs—heavily contributed to June’s inflationary fall. Additionally, there were “notable downward effects from food, non-alcoholic beverages, furniture and household goods, and restaurants and hotels,” according to the ONS.
Interest Rate Predictions
Responding to June’s inflation data, financial markets have revised their peak interest rate predictions. The Bank of England recently raised interest rates for a 13th consecutive time, with interest rates originally expected to surpass 6% by the end of the year. However, several economists have since amended this predicted peak to 5.5%, providing welcome relief for borrowers and mortgage holders.
The Cost-of-Living Crisis Persists
Although a fall in inflation could signal that normal economic times are on the horizon, the cost-of-living crisis persists. In fact, the UK inflation rate is the highest among the G7 group of advanced economies, and the costs of many goods and services remain high.
In particular, food and non-alcoholic beverage prices rose 17.4% in the year to June 2023. Although 1.8% down from its peak in March 2023, some staples—including milk, eggs and cheese—continue to be expensive. Private rental prices have also risen by 5.2% in the past year. Cumulatively, core household expenses could continue to stretch budgets for some time.
Conclusion
Despite the fall in inflation, disposable incomes may continue to be squeezed as certain goods and services remain costly. As such, it’s important for both individuals and businesses to consider ways to cut costs while staying abreast of the economic outlook.
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Contains public sector information published by GOV.UK and licensed under the Open Government Licence v3.0.
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