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Suren Thiru: August rate rise still expected despite inflation fall

Author: ICAEW

Published: 19 Jul 2023

Suren Thiru, Economics Director at ICAEW, responded to the UK inflation figures for June 2023, released by the Office for National Statistics today (Wednesday 19 July 2023):

“Although inflation is moving in the right direction as energy prices decline, core inflation and food costs mean it remains far too high to offer any real relief to struggling households and businesses.

“June’s decline in inflation should be followed by a hefty fall in July, with lower energy bills – following the reduction in Ofgem’s energy price cap – likely to pull the headline rate below 7%.

“Core inflation should continue to trend downwards as the lagged impact of interest rate hikes and tax rises squeeze demand, but at the expense of a notably weaker economy and higher unemployment.

“While interest rates will probably rise again in August, focusing too much on current inflation data to set rates can lead to damaging policy mistakes given the long time lag between rate rises and their effect on the wider economy.”


Notes to editors:

Contact: ICAEW media office media.office@icaew.com, tom.mackintosh@icaew.com or 07866 853 841