Inflation set to fall further, no grounds for rate rises

Commenting on June’s inflation figures, Editorial and Research Fellow at the free market think tank the Institute of Economic Affairs, Professor Len Shackleton, said:

“If last month’s 8.7 per cent annual increase in the CPI was unexpectedly high, this month’s 7.9 per cent is a shade lower than expected. This is mirrored in other indicators such as CPIH and core CPI.

“Since these figures were tallied, Russia has ended a deal to allow grain exports from Ukraine, which will likely push up global and UK food prices. Mortgage rates have also gone up. Nevertheless, since the extraordinary increases in the money supply that ultimately fuel inflation have ended, inflation is set to fall further.

“Rishi Sunak’s pledge to halve inflation by the end of the year may still be optimistic, but at least there are no grounds for the Bank of England to raise interest rates further. Nor are there any grounds for panic measures to hold down prices artificially, such as Grant Shapps’ silly initiative to curb supermarket petrol prices.”


Notes to Editors

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  • CPIH, which includes owner-occupiers’ housing costs, is down from 7.9 per cent to 7.3 per cent.

  • Core CPI, which strips out energy, food, alcohol and tobacco to give a clearer picture of underlying trends, was down from 7.1 per cent to 6.9 per cent.

  • Reduced motor fuel and food prices drove the fall in CPI and CPIH, which were not offset by other price increases.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.