Latest inflation data: Personal finance experts react

UK inflation held steady in June, remaining at the Bank of England’s target rate of 2%, according to the latest official figures

Discounts on clothes in summer sales helped offset the soaring cost of hotel stays.

Overall, inflation rose at 2% in the year to June, unchanged from May.

It means that the cost of living is still rising but at a rate that the central bank is comfortable with, after nearly three years of above-target inflation which has squeezed household finances.

The latest figures showed clothing and footwear costs fell last month, while food and drink inflation has dropped sharply from the highs of recent years.

Grant Fitzner, chief economist at the Office for National Statistics (ONS), told the BBC’s Today programme that there was a “higher level of discounting”.

The figures also showed that second-hand car costs fell but by less than the same time last year.

Prices in restaurants and hotels rose more than a year ago though, putting some upward pressure on the headline inflation rate.

Andy Mielczarek, Founder and CEO of  Chetwood Financial, said: “After years spent hiking the mountain of inflation, it’s good to be back on solid ground. Inflation is finally under control, and this gives Britain a platform to begin rebuilding itself, putting behind the challenges of the past two or more years.

“It will be interesting to see how quickly interest rates fall, and by extension how much confidence the Bank of England has in the rate of inflation, but for the moment we can enjoy some long-awaited stability.

“However, while rampant price rises have been curbed, the cost of living is still at a dangerously high level and other strains still impact the daily lives of people throughout the country. There is more to be done to improve Britons’ financial well-being, and banks will play an important role in ensuring they have the right tools to make their lives and finances more secure.”

Low inflation and promise of base rate cuts

Paresh Raja, CEO of Market Financial Solutions, said: “Borrowers have had to navigate the inflation storm over the past two years, but the past three months suggest it has been brought under control. This is good news for borrowers, and will likely provide prospective buyers with greater confidence in the second half of the year.

“Coupled with the arrival of a new government with a significant majority, there is a welcome sense of stability and calm returning to the property market. Indeed, lower inflation and less economic turbulence could prompt the Bank of England to finally cut the base rate in two weeks’ time, which would be another boost for borrowers.

“However, it’s crucial to acknowledge that the base rate won’t be cut as quickly or significantly as it was hiked. Brokers will need to support borrowers and manage expectations accordingly. Meanwhile, lenders should focus on offering a broad range of product types that enable brokers and borrowers to choose options that best match their needs and their own predictions for what the base rate will do over the coming months and years.”

Investors must remain vigilant in case of more economic turbulence

Jatin Ondhia, CEO of Shojin, said: “With inflation already at the 2% target, the fact it has remained unchanged for another month will likely bring reassurance to investors. In recent times, the focus was on finding investment options that could outpace high inflation. Now, with inflation and interest rates both stable, investors can approach the second half of 2024 with greater clarity.
 
“The expectation remains that the base rate will be cut twice this year, probably starting at the Bank of England’s next meeting on 1st August. But that is not a given – the Bank may fear another uptick in inflation over the coming months. So, investors need to remain vigilant, consider broader economic factors, including any new policies bought in by the new government, and then adapt their plans accordingly.
 
“We should expect diversification to sit at the heart of many people’s investment strategies, with a focus on balancing different savings products and lower-risk investments with some higher-risk options to aim for greater growth in the medium- to long-term. The evolving investment trends throughout the rest of this year will be interesting to observe, especially given the more stable economic environment compared to 12 months ago.”

BoE hawks take the victory with August rate cut now less likely

Sam North, analyst at investment platform eToro, says: “The BoE hawks take the victory. UK inflation held steady at 2% in June, slightly above expectations, driven by rising hotel and restaurant prices, while clothing prices fell. This persistent inflation reduces the likelihood of an August rate cut, with markets reacting cautiously. Further wage data on Thursday will be crucial in shaping future monetary policy decisions.

“The GBP initially spiked higher before pulling back to pre-release levels. For those hawkish BOE members, the ones who wanted to see the central bank keep things on hold again next month, this is exactly what they would have wanted to see. Whilst services inflation was higher, it wasn’t higher than the previous month. A silver lining for the dove maybe but I would be surprised now to see the BOE cut rates on August 1st.”

George Lagarias, Chief Economist at Forvis Mazars comments: “On paper, UK inflation stabilising at 2% should be more than enough for the Bank of England to hit the launch button on rate cuts. However, we understand the central bank’s reluctance. Headline inflation is less important now than services inflation, which remained at 5.7%, roughly double its long-term average. China continues to deflate global durable goods, but this will probably eventually stop. As long as services inflation remains elevated, it will act as a significantly negative factor in the Bank’s rate cut considerations.”

Lily Megson, Policy Director at My Pension Expert, said: “The first inflation figures post-election are a promising sign. For retirees and those planning their retirement, stable or target levels of inflation are crucial. But we mustn’t fool ourselves. Target inflation isn’t an immediate fix for years of savings-bashing price hikes.

“It’s therefore vital people are provided with the help and support they need to get fully back on track with their finances.

“Our new government should use this period of stability to move Britain out of ‘defence mode’ and reinforce financial education and guidance on savings and investments. With inflation under control, people can start to feel more secure about their future, but ongoing support and practical advice will be key in helping them regain their financial footing.”