June’s inflation slowdown has offered some relief to households, but higher energy costs and ongoing geopolitical tensions have been warned, testing progress in the months ahead.
UK inflation fell to 2.6% in June, offering some relief to households even as concerns persist over the outlook for energy and food prices.
Commenting on the latest Office for National Statistics (ONS) data, Kevin Brown, savings expert at Scottish Friendly, said: “A dip in inflation in June creates a striking disconnect between months of alarming headlines about the Middle East and an official rate that has nevertheless continued to move lower.”
The easing was reflected in a number of everyday household costs. Danni Hewson, Head of Financial Analysis at AJ Bell, said: “June was like a breath of fresh air for many cash strapped families who will have noticed that the price at the pump fell significantly, for the first time since the conflict in the Middle East began at the end of February.”
She also pointed to lower prices for items including sugar, chocolate and dairy products, alongside deeper-than-expected discounts from clothing retailers looking to attract cautious consumers.
However, while households may have welcomed some respite, industry experts have cautioned against assuming inflationary pressures have disappeared.
Brown said: “People shouldn’t be complacent. Today’s figure is arguably backward-looking and may not fully reflect yet the higher energy costs households will begin to face following July’s energy price-cap change.”
Rob Morgan, Chief Investment Analyst at Charles Stanley Direct, part of Raymond James, echoed those concerns, warning that “the Summer lull in inflation may prove short-lived as renewed tensions in the Persian Gulf once again threaten global energy and food markets.”
As a result, he said “households may therefore need to brace themselves for higher bills and pricier shopping baskets in the second half of the year.”
Energy prices remain a particular focus. Hewson noted that “the resumption of hostilities in the Middle East has seen wholesale prices of gas and oil jump, with the price of Brent crude now rounding $93 a barrel and motorists already experiencing climbing prices.”
The inflation figures are also likely to influence expectations for the Bank of England’s next interest rate decision.
Brown said: “The Bank of England may now decide it can hold its base rate next week rather than raise it, however policymakers are likely to remain wary of next month’s inflation reading which could present a far less comfortable picture.”
Hewson similarly suggested policymakers may feel less pressure to act immediately.
“For the Bank of England, it’s likely to buy them another month to consider their options,” she said, adding that market expectations of a rate hold had strengthened following the release of the data.
Despite lower inflation, commentators stressed that many households remain under pressure.
Morgan said: “For many families the cost-of-living squeeze is far from over.” While wages have increased in recent years, he noted that much of the benefit has been offset by higher living costs and taxation, making it harder for households to build savings and improve living standards.
“For many households still recovering from previous inflation shocks it may feel as though they’re back at square one,” he added.
Brown also stressed that “lower inflation still means prices are rising, not falling”, urging consumers to keep savings, spending and investment plans under review.
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