There have been suggestions that the respite in inflation is only temporary
There was a pause in inflation levels on Wednesday as the CPI rate arrived below expectations at 2%.
Analysts were expecting a recording of 2.3% for last month, 0.2% below the inflation figure recorded in June.
According to the Office for National Statistics, clothing and footwear prices were subdued, helping to keep inflation rates down.
However, there have been suggestions that the respite is only temporary with businesses set to face rising costs.
Commenting on the UK CPI slowing to 2%, Ian Warwick, Managing Partner at Deepbridge Capital, said “While inflation may have slowed slightly to fall within the Bank of England’s target of 2% this does not mean that rates won’t pick up over the coming months. Many early-stage businesses will be thriving in the recently reopened economy, but they will continue to watch the debate around the decision on a subsequent rise in interest rates very closely as this will directly impact how much they are able to borrow at a crucial time.”
With inflationary pressure continuing, it also raises the question of exactly how long the Bank can hold interest rates at current levels before it is forced to step in.
“This could cause a problem for growing, early-stage companies who require access to funding as we focus on economic recovery. It therefore remains critically important that scale-up businesses, particularly in high-growth sectors such as digital technologies and life sciences are supported as they will be at the very heart of economic growth as we create an economy fit for the twenty-first century,” Warwick says.
The Bank of England says that inflation will rise to 4% by the end of 2021, double its target, while there are concerns that it could go even higher.
ONS Deputy National Statistician Jonathan Athow said: “Inflation fell back in July across a broad range of goods and services, including clothing, which decreased with summer sales returning after the pandemic hit the sector last year.”
“This was offset by a sharp rise in the price of second-hand cars amidst increased demand, following a shortage of new models.”