The latest inflation figures show the price of everyday costs is continuing to surge. Overall inflation for the year to June dropped from 8.7 percent to 7.9 percent while core inflation is down from a record 7.1 percent to 6.9 percent.
Core inflation is the measure of the rise in the price of goods and services without accounting for energy bills and food.
Giles Coghlan, chief market analyst for HYCM, said: “Core inflation continues to be a thorn in the central bank’s side at 6.9 percent, highlighting the risk that domestic inflationary pressures are here to stay for now.
“The implications of this inflation reading go beyond just numbers on a chart. As stagflation fears loom larger, the GBP may face downwards pressure from that quarter too.
“The persistence and increasing severity of UK inflation could amplify worries about the country’s economic health on the world’s stage, potentially leading to a decline in the GBP’s value.”
READ MORE Inflation still ‘far too high’ despite dropping lower than expected to 7.9%
The latest figures mean inflation has eased by more than expected to its lowest level for 15 months.
Many economists were expecting the overall figure to drop to 8.2 percent rather than down to 7.9 percent.
The ONS has said falling fuel prices are the biggest driver behind the drop, while food price inflation has also dropped to 17.3 percent from 18.7 percent in May.
ONS chief economist, Grant, Fitzner said: “Inflation slowed substantially to its lowest annual rate since March 2022, driven by price drops for motor fuels. Meanwhile, core inflation also fell back after hitting a 30-year high in May.
“Food price inflation eased slightly this month, although it remains at very high levels. Although costs facing manufacturers remain elevated, especially for construction materials and food items, the pace of growth has fallen across the last year, with the overall cost of raw materials falling for the first time since late 2020.”
Energy Security Secretary Grant Shapps said inflation is still “far too high” although he hailed the latest figures as positive news.
He told Times Radio: “It is good to see the inflation figures coming down as much as that.
“We’ve been doing a lot of things to try to support people through this period of high inflation caused by the shock in energy prices.
“It is good to see that that is starting to pay dividends with inflation coming down to 7.9 percent.
“It is still far too high and a big cost, but nonetheless moving in the right direction now.”
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Lily Megson, policy director at My Pension Expert, warned high prices will continue to pile pressure on Britons’ budgets, particularly for the retired.
She said: “Today’s figures have confirmed what many already assumed – inflation continues to plague Britons’ finances and will continue to do so for some time.
“And for those approaching or in retirement, it adds a further layer of uncertainty as they consider how they can make their hard saved pension fight to hold its value.
“Remaining calm is vital. So, too is seeking the support from guidance, or using advice for personalised recommendations.”
She spoke about the different options pension savers have, saying: “From annuities to flexible access drawdowns, there are various options available to provide the right levels of security and risk which will suit individual needs – and under the current climate, the Government would be wise to point savers in the direction of both types of support to ensure they don’t inflict financial self-harm.
“After all, in the wake of its latest drive to improve pension outcomes, this could be a logical next step.”
Becky O’Connor, director of Public Affairs at PensionBee, warned Britons they still face difficult months ahead as the cost of living remains high.
She said: “The heat of high inflation is beginning to cool a little, giving hope to households that the worst could be over for both price and interest rate rises.
“But for anyone who is hanging on by their fingernails, this decline in prices may be cold comfort. Many households, especially those facing high prices and punishing borrowing costs, still face months of difficulty.
“If prices continue to come down but rates remain high, the worst of the economic pain will be transferred from the general population dealing with high prices in the shops, to mortgage borrowers grappling with monthly repayments.”
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