Mike Ambery, Retirement Savings Director at Standard Life plc said: “Today’s fall in inflation to 2.6% is no doubt a welcome boost to Andy Burnham and his new chancellor John Healey, particularly after concerns that price pressures could remain stubbornly high. However, it's too early to assume inflation is now on a steady downward path. July's energy price cap increase has yet to feed through into the data, while ongoing global uncertainty and the new government's spending decisions could still influence the outlook over the coming months. With this in mind, today's figures are unlikely to be enough on their own to trigger a Bank of England rate cut. Policymakers are expected to keep rates on hold next week and will want greater confidence that inflation is moving sustainably back towards the 2% target before changing course. This uncertainty is already feeding through to borrowers, with mortgage rates rising in recent weeks as lenders reassess the outlook for inflation and interest rates. For households and those planning for retirement, it’s important to remember that lower inflation does not mean prices are falling, they are simply rising more slowly. The joint impact of higher food, energy and everyday costs can still make long-term saving feel difficult. Pension contributions may seem like an obvious place to cut back, but pausing can mean missing out on employer contributions, tax relief and potential investment growth. Therefore, where affordable, it’s important to stay engaged with your pension, review what you are paying in and maintain or even increase contributions when circumstances allow, all of which can help people build greater financial security over time.”
George Brown, Senior Economist at Schroders, said: "Lower fuel prices applied the brakes to inflation in June, but this rear-view mirror picture doesn't tell us much. With oil prices rising again amid renewed tensions in the Middle East, there could be inflation issues further down the road. For the Bank of England, the crucial question is whether this remains an energy shock or becomes a domestic inflation problem. So far, a cooling labour market suggests there is little risk of the sort of second-round effects that would warrant tighter monetary policy. That should allow policymakers to keep a steady hand on the wheel. While markets are pricing more than two rate hikes over the next year, we think the Bank can stay on hold as it gauges whether the latest energy shock is just a temporary bump in the road or something more persistent."
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