‘Trend is likely to remain upwards’

Comment Suren Thiru

While the fall in inflation in June will surprise many, consumer price growth is likely to resume its upward trend in the coming months, with the elevated cost of imported raw materials still filtering through supply chains. Falling prices for motor fuels were the main driver behind the fall in the inflation rate last month.

Inflation remains a major risk to the UK’S growth prospects this year, with rising cost pressures for likely to dampen economic activity.

However, it remains likely that the current spell of high inflation will be relatively short lived with moderating price growth at the factory gate indicating that inflationary pressures in the supply chain are starting to ease. If this trend continues as we expect, inflation is likely to peak sooner rather than later.

With UK economic conditions softening, it is crucial that the MPC holds its nerve on interest rates, particularly during this period of heightened political uncertainty. Raising rates too early could undermine consumer and business confidence, stifling UK growth further. l Suren Thiru is head of economics at the British Chambers of Commerce