UK inflation fell to 2.6% in June in an early boost for new Prime Minister Andy Burnham. This is down from the 2.8% that was recorded in May. But experts say the relief will be temporary, and are forecasting a jump in inflation in July, after energy bills went up.
Expert warns of uncertain energy disinflation path
Sanjay Raja, chief UK economist for Deutsche Bank, said: “While we’re nowhere close to the peaks seen during the height of the Iran conflict, the energy disinflation path remains uncertain.”
New VAT cut on electricity bills announced
The latest inflation data comes after Mr Burnham announced a new VAT cut on electricity bills from October. Inflation shows the rate at which the price of goods and services rises over time. For example, if the rate of inflation is 3%, then something that cost £100 last year, would cost £103 now. When inflation falls, it does not mean that prices have stopped rising - they are just going up more slowly than before. The Bank of England has a target of 2% inflation and uses interest rates as a way of keeping price rises under control.
