YoMagine “Don't Panic” in great friendly letters, the roses that fans The Galaxy Autoestopist Guide He will know well: when you read that inflation made us dirty last month, reaching 3.6 percent.
The last weeks have seen the governor of the Bank of England, Andrew Bailey, abandoning suggestions on tariff cuts, even suggesting that the monetary policy committee (MPC) of rates fixing could go more and faster if the labor market continues to deteriorate.
But June's inflation spoiled the party, reaching a maximum of almost 18 months, far ahead of the city's consensus prognosis compiled by Reuters. Reduced 3.4 percent, which is also what the bank expected.
Prices in the United Kingdom are working, much hotter than in Germany (2 percent) or France (0.8 percent). With the inflation of 2 percent for the Eurozone as a whole, the refinancing rate of the European Central Bank is in just 2.15 percent, which greatly facilitates the lives of the economies of those countries compared to the load of the base rates of 4.25 percent that the British economy is fighting.
Houston, do we have any problem? He could be forgiven for thinking so much, assuming that the National Statistics Office obtained its right sums (it was not in April).
The transport sector, where inflation doubled more than 1.7 percent, was identified as the main villain. The engine fuel was a great taxpayer to that. But there were other unpleasant ones: the cost of clothing and footwear, for example, increased 0.5 percent in the 12 months until June 2025, compared to a 0.3 percent drop in the 12 months until May. The warm climate and retailers, who fight under the weight of higher costs, decided that they could leave the discount in the high demand of consumers looking for a warm climate equipment.
Food prices showed an increase of 4.5 percent compared to 4.4 percent of the previous month, the third consecutive increase. Too much for the supermarket price war. The number, said the ONS, is still “well below the peak seen at the beginning of 2023”, when it was almost double. Well, UF. But no, wait only for a moment. These numbers are cumulative. This last increase is presented by what has already been deposited. So that is not really comfort, especially for people with limited budgets fighting to reach the end of the month.
“I know that working people are still fighting with the cost of living,” said Foreign Minister Rachel Reeves. Actually? Unless he has been at the sharp end, unless he knows how he feels wondering how he will feed his children, he really does not.
The bankers gave an exciting joy to the chancellor's deregulation plans (high -risk) at the annual dinner of the house of the mansion the night before The Ons delivered a hangover of hell. They can easily resist this storm. The problem for Reeves, and the Labor Government as a whole, is that they will not decide the result of the next election.
Inflation of service prices, a long time concern for the MPC, remained at 4.7 percent, but at least it did not increase. However, the inflation of the observed nucleus, which eliminates volatile categories, including food, energy and tobacco, increased up to 3.7 percent from 3.5 percent. Then there was no comfort there.
At this point, you are probably asking how hell could he say “not to panic” at the beginning. It is true that it is not a pretty image, and will provide fresh meat for the fender in the MPC. I can see up to three voting “retain” at the next meeting (my bet is on external members Catherine Mann and Megan Greene; and the main pill of the Huw Bank).
But here is the thing: the economy has begun to fight, bad. He shrunk in April and May, underlining expectations in the process. The labor market has been fastened under the weight of reeves that increase the contributions of the National Employer Insurance, and salary settlements have begun to decrease.
The last evidence of that was courtesy of the regular KPMG/REC report on works, published at the beginning of the week. He discovered that permanent staff quotes fell to the most pronounced rate for almost two years in June, while the availability of candidates increased to the strongest rhythm since November 2020. That, he remembers, it was when the pandemic was still furious. More people fighting for less vacancies means that employers can, and they will pay less.
Inflation is already expected to fall later in the year, but less jobs and lower salary settlements will be combined to further reduce price pressures in the economy. Despite this, the monetary policy of the United Kingdom is still restrictive. That being the case, the MPC could (and should) cut in August and follow it shortly after.
So remember those friendly pink letters: do not scare. Loan costs will fall. With a little luck.
