The release of July’s inflation data from the Office for National Statistics showed CPI flat on the month with a 2.8% rise year-on-year and RPI also flat, but with a slightly lower year-on-year rise of 3.1%
The ITEM Club said base effects had pushed the annual inflation rate up in June so it was always likely to unwind in July, but inflationary pressures seemed to have eased given the month-on-month stagnation.
“There is little sign of any inflationary pressure from the supply pipeline and, with global growth disappointing, commodity prices might soften further, therefore exerting a further downward pressure on prices.
The core CPI reading, which excludes volatile and government-taxed influenced components such as energy, food, alcohol and tobacco) came in at 2% year-on-year, matching its lowest reading since 2009.
“This fits with the Bank of England narrative that domestically generated inflation is actually very well behaved,” Kames Capital’s fixed income manager John McNeill said.
But Hargreaves Lansdown’s Adrian Lowcock did not take such a benign view, noting cash investments had lost savers 11.47% since interest rates fell to 0.5% in March 2009.
“The Bank of England has forecast interest rates may remain low until 2016. If this is the case, savers can expect interest on their savings to remain below inflation for another three years,” he said.
