Inflation close to 'topping out' as CPI holds steady at 2.6% in July

While inflation remained steady, it still sits above the Bank of England's 2% target.

Motor fuel prices provided the biggest downward contributor, falling 1.3% between June and July, its fifth month of declines. Over the same period last year, they rose by 0.7%.

This was offset by upward contributions from clothing, household goods, gas and electricity, as well as food and non-alcoholic beverages.

Thomas Wells, manager of Smith & Williamson's Global Inflation Linked Bond fund, said: "CPI remains well above the Bank of England's 2% target and we expect it to remain elevated throughout Q3 and Q4 2017.

"Headline inflationary pressure should begin to moderate in 2018 as the large year-on-year slump in sterling drops out of the numbers.

"Policy wise, we think the Bank of England will continue to look through the inflation data, leaving rates unchanged. Few, if any, of the Brexit uncertainties are close to even a basic form of resolution and with UK savings ratio at incredibly low levels, the BoE will be very reluctant to throw the consumer out of bed, particularly as wage growth is failing to keep pace with inflation."

Ian Kernohan, economist at Royal London Asset Management, commented: "While there is still some residual impact of sterling devaluation to feed through, with underlying inflationary pressures low, we think CPI is close to topping out for the immediate future. 

"In their latest Inflation Report, the Bank of England forecast inflation to peak at 3% in the autumn, and will be happy to keep interest rates on hold as a result."

• Tweet  
• Facebook  
• LinkedIn  
• Send to  

• Topics
• Investment
• Inflation
• ONS
• Office for National Statistics
• CPI
• Consumer Prices Index
• Bank of England
• interest rates
• Royal London Asset Management