Latest figures shows that the rate of inflation has remained at 2%, the target rate for the Bank of England. The figure is marginally higher than expected by forecasters.
It means that consumer prices in June rose at the same rate as they did in May, data from the Office for National Statistics showed.
Specific trends showed that hotel prices rose strongly while second-hand car costs fell at a slower pace. Clothes sales also brought costs down, while raw material costs also fell.
The absence of a fall is likely to be unwelcome news to the interest-rate setters at the Bank of England who have kept borrowing high to bring inflation down to 2%.
An interest rate cut would be good news for mortgage holders and people paying back other forms of debt like loans or credit card bills. But the market expectation is still on a knife edge as to whether there will be a cut in August.
Scott Douglas, Capital Markets Director at corporate finance advisor Centrus, commented:
“June’s CPI data shows inflation remaining in line with the Bank of England’s 2% target for a second consecutive month. This will put pressure on the Bank of England to start cutting interest rates, however, wage growth, unemployment and service price inflation data remain relatively robust which could support the argument for interest rates to be held flat at 5.25% for another meeting.
“All eyes will turn now to any additional indications on the direction of travel ahead of the Bank of England Monetary Policy Committee meeting on August 1st. For companies looking to manage their financing, it’s critical that they’re thinking about their long-term interest rate strategy and the various tools available to manage this, including hedging.”
Meanwhile, Neil Rudge, chief banking officer for commercial at Shawbrook, commented, “A slowdown/continued hold in price growth is good news for the business community, as not only does this enhance the likelihood of a base rate cut, but also acts as a much-needed indicator of post-election stability after months of uncertainty in the lead-up to the new government.
“We are seeing a steady and growing flow of applications for funding across our SME business, suggesting that businesses are feeling more positive about the future, and ready to press ahead with any growth plans that may have previously been put on hold. With the election behind us, and further clarity on the government’s plans likely after today’s King’s Speech, many business leaders will be starting to concentrate on that next business priority, whether that’s an acquisition, expansion, or exit.”
| Mike Randall, CEO at Simply Asset Finance says: “Businesses will remain hopeful that the new government will be a launchpad for growth. With inflation remaining steady, immediate government action is needed to sustain economic recovery.”“To bolster small businesses, they must address the late payment crisis, implement further planning reform |