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UK Inflation Falls, Interest Rate Projected to Rise


BNR – Following the United Kingdom’s unexpected inflation fall last month, interest rates may rise less. Interest rates have been hiked 13 times by the Bank of England since December 2021. The hikes were the bank’s necessary attempts to reduce the sharp price rises and increase borrowing costs.

Analysts state that it’s currently under less stress to make a move following the inflation slowing. Inflation became 7.9 per cent in June, a drop from 8.7 per cent in May.

UK Inflation Drops to Record Low

The drop indicates that the UK’s inflation has fallen to a record low in over 12 months.

Decreasing fuel costs played a role in the June slowing, while food prices rose less sharply. The information is provided by the Office for National Statistics (ONS), the entity that reveals the statistics.

The United Kingdom’s inflation rate, however, is still nearly 4X over the Bank’s 2 per cent target. It is also extremely higher than other developed states. In the United States, for instance, it is 3 per cent, while in the eurozone it is 5.5 per cent.

“It is a large drop [in the UK],” ONS chief economist Grant Fitzner said. “But let’s not forget that last month we saw no change at all in headline inflation.”

“It still looks like we may have the highest rate of inflation in the G7,” he added.

Impact of High-Interest Rates on Borrowers

The food, power and services prices have skyrocketed since 2022, resulting in siphoning citizens’ income.

The Bank has hiked interest rates from none to 5 per cent to solve the issue. It made borrowing more difficult and pricier, thus consumers will have to reduce expenditure, resulting in price decreases.

Furthermore, high-interest rates have hiked mortgage borrowing costs to a record high in over a decade and a half. This has left many homeowners subject to higher month-on-month payments.


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