Despite falling between May and June in recent years, the price of second-hand cars also increased
UK inflation soared to 2.5% in June, well above the Bank of England’s target of 2%.
It is at its highest level since August 2018, which could refocus attention on the Bank of England‘s policies aimed at stimulating the economy.
June’s reading was above most economists’ forecasts of a rise of around 2.2%.
Food shopping costs more, in addition not eating and drinking out, while the price of clothing is also up in June.
Despite usually falling between May and June in recent years, the price of second-hand cars increased, according to the ONS.
It has been suggested that some buyers opted for the second-hand car market as the shortage of semiconductor chips caused delays in the production of new cars.
Neil Messenger, Director of Client and Markets at 1825, said the fast approaching ‘freedom day’ is likely to push that figure even higher as “with each step out of lockdown comes another boost to consumer confidence and demand”.
The Central Bank has done its due-diligence and sought to calm fears about inflation. However, they’ve also made it clear that they plan to let it gradually subside rather than take action.
“With no way of knowing how long this could take, we would encourage those with savings to act now to do what they can to beat rising inflation. This might seem particularly hard in a low-interest rate environment, but there are options out there to help make your money work harder for you,” Messenger added.
Looking ahead, Robert Alster, CIO at investment management firm Close Brothers Asset Management, believes that inflation is likely to “oscillate” in the coming months as the economy continues to reopen.
“In ‘normal’ times it’s possible that the Bank of England might consider deploying tools to keep a lid on inflation over the summer. But these are not normal economic times. With the Furlough Scheme coming to an end, and the possibility – hopefully remote – of social restrictions being reintroduced towards the winter – the Bank will be keen to hold off from making any decision on interest rates unless inflation looks like it’s rising too quickly,” Alster added.
