Inflation remains at 2% for second month

Inflation in the UK has remained at 2% for the second consecutive month in June 2024 according to new figures published by the Office of National Statistics (ONS).

The ONS’ headline Consumer Price Index (CPI) remained unchanged on the previous month, with inflation holding at the Bank of England’s target rate. Owner occupiers’ housing costs, however, rose slightly and are up 6.8% year on year, a slight increase on May’s figure.

Factors helping to keep inflation down include falling prices on clothing, as well as a significant slowdown in price rises of food and drink, which had been among the fastest growing categories this time last year. Rising prices in the hospitality sector, housing costs and transport costs (in particular, petrol and diesel prices) were the main upward pressures on inflation in June.

Despite inflation remaining at the Bank of England’s target rate for a second consecutive month, financial markets have become less optimistic that the UK’s central bank will cut its base interest rates on 1st August when its Monetary Policy Committee (MPC) next meets.

In its previous meeting, the MPC had looked at persistent high inflation in some sectors of the economy as increasing the risk of lowering interest rates too soon. The International Monetary Fund has also warned that the UK may need to keep interest rates higher for longer to help combat inflationary pressures in the economy and prevent more rapid price rises taking hold once again.

Despite that, interest rates on some fixed-rate mortgages offered by lenders have begun to fall in anticipation of a cut to the Bank of England base rate, easing some financial pressures on homeowners.