Rate rise remains likely despite surprise inflation fall to 6.7%

investmentweek.co.uk:

Food inflation remains well above the headline rate but has also fallen, down to 13.6% from las month’s 14.9% figure.

Headline CPI fell 0.1 percentage points month-on-month in July, while core CPI, excluding energy, food, alcohol and tobacco, fell 0.7 percentage points to 6.2%.

Food inflation remains well above the headline rate but has also fallen, down to 13.6% from las month's 14.9% figure.

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Chancellor Jeremy Hunt argued the fall demonstrated the government's plan to halve inflation is «working — plain and simple», but noted it remains «too high» and a barrier to sustainably higher growth.

While Neil Birrell, CIO at Premier Miton Investors, said the surprise fall «may provide some relief» for the Bank of England, it is unlikely to prevent a further rate hike tomorrow (21 September).

Alice Haine, personal finance analyst at Bestinvest, also argued it «may be too soon to put the brakes on» if the central bank is keen to «tame persistent inflation for good».

However, while Daniel Casali, chief investment strategist at Evelyn Partners also noted the positive news regarding today's figures, he warned of the backward-looking nature of the data.

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«It could be argued that the decline seen in energy prices are in the rear-view mirror. Looking forward, the risk of another leg up in inflation from energy prices has increased a little following the August decision by the Saudis and Russians to implement new crude oil supply cuts into year end,» he explained.

Chris Beauchamp, chief market analyst at IG Group, added that while Andew Bailey «may get his wish» to bring rate hikes to an end, the «ongoing