Time to recap, after a potentially pivotal day in Britain’s fight against inflation.

UK inflation fell further than expected in June to 7.9% amid a sharp fall in petrol prices, raising hopes that the Bank of England may not raise interest rates as high as feared in the months ahead.

The Office for National Statistics said the annual inflation rate as measured by the consumer prices index resumed a downward path after unexpectedly sticking at 8.7% in May.

The drop exceeded City forecasts for a decline to 8.2%, and took inflation to its lowest since March 2022.

Financial markets responded by betting that the Bank of England would no longer drive interest rates above 6% early next year. They are now expected to peak at around 5.75% around the end of this year.

Markets also predicted that the central bank would introduce a more modest quarter-point rise in borrowing costs at its next policymaking meeting in August, instead of a tougher half-point increase from the current level of 5%.

Sanjay Raja, Deutsche Bank’s chief UK economist, says:

The probability of a quarter point hike is higher, following the June CPI miss.

ING’s James Smith said that we finally have good news on UK inflation.

Here’s a breakdown of the key price changes:

Shares rallied strongly in London, with the FTSE 100 posting its biggest points gain of the year as traders took confidence that interest rates will peak lower than feared. Housebuilders led the rally.

UK government bonds also rallied, which could push down the cost of mortgages in the coming days.

The pound tumbled by 1.5 cents against the US dollar.

The drop in inflation, from 8.7% in May, could make it easier for Rishi Sunak to hit his target of halving inflation this year…

Bank of England deputy governor Sir Dave Ramsden has warned, though, that inflation remains “much too high”.

Warning that further interest rate rises are coming, Ramsden said:

CPI inflation has begun to fall significantly but remains much too high.

The MPC has consistently stressed that monetary policy decisions will address the risk of more persistent strength in domestic wage and price settling.

In other news…

Cross-Channel transport bosses have warned MPs that “time is running out” for the UK to prepare for the EU’s entry/exit system (EES).

Australia’s Macquarie Group has tightened its grip on the UK’s energy sector today by buying another 20% of National Grid’s UK gas transmission and metering business.

Oil giant BP has been fined £650,000 over health and safety failings after a worker fell through an open grating on an offshore platform into the sea and died.

The UK’s competition regulator has provisionally cleared semiconductor designer Broadcom’s $69bn deal to buy cloud computing firm VMware.

UK homebuilders have racked up the biggest percentage gain in their shares since 2008, after signs of slowing inflation helped to bolster hopes that UK interest rates will not rise as high as once thought.

Beaten down homebuilders surged 7.0%, Reuters reports, as investors cheered data showing British inflation fell to a more than expected 7.9% in June, its slowest pace in more than a year. Economists were forecasting a rise of 8.2%.

Bank of England deputy governor Sir Dave Ramsden has just declared that UK inflation “remains much too high”, after it fell to 7.9% in June.

In a speech at the Bank this afternoon, Ramsden pointed out that its Monetary Policy Committee (on which he sits) had predicted in May that headline CPI would fall sharply from April 2023 onwards as energy prices ease.

Ramsden says:

That is what we have seen since, with CPI inflation falling from 10.1% in March to 8.7% in April and to 7.9% in June.

The Bank’s inflation target is 2%, though.

Ramsden warns that the Bank will look for signs of persistent inflationary pressures in the economy, including wage growth and services price inflation.

He says:

CPI inflation has begun to fall significantly but remains much too high. The MPC has consistently stressed that monetary policy decisions will address the risk of more persistent strength in domestic wage and price settling.

Cross-Channel transport bosses have warned MPs that “time is running out” for the UK to prepare for the EU’s entry/exit system (EES), which threatens to further slow down border processing times for passengers and hinder the flow of trade.

The scheme, which will require new biometric identification of all foreign citizens entering the EU to be taken at the border by immigration officials, has been delayed until 2024, with implementation now likely after the Paris Olympics.

The system has been designed for airports and not those in with cars and coaches, executives from Eurotunnel and the Port of Dover told the Commons European Scrutiny committee.

Doug Bannister, chief executive of the port of Dover, said that the process as currently designed “could make it two to four times as long to go through the border as today”, adding:

“If unresolved that could result in significant queueing.”

Passengers have already been told to expect long waits this weekend due to post-Brexit stamping of passports.

John Keefe, corporate affairs officer at Eurotunnel, said:

“[the] scheme was designed for comfortable airports in EU territory.. .where it struggles is where cars drive through large open spaces in all weathers and all times, and data capture has to look at people deep inside a vehicle.”

Bannister said one third of all trade between EU and the UK came through the port and capacity depended on “how quickly can we get things through. This is not just a commercial thing for us – this new regulation has a large strategic impact on the health and prosperity of the nation.”

He urged the government to come to an agreement with France and to lobby the EU to ensure that rules and technology allowed biometric data to be taken remotely, rather than at the port, adding:

“We need to know that the app is coming in, and we need to be given the time to test that, and to ensure we can register that remotely. We need to know now. We’re running out of time. It’s an urgent issue.”

Keefe cited a study by Logistics UK that said a day of disruption at the Channel equated to a £250m loss to the UK economy.

The London stock market has closed…. and Britain’s FTSE 100 has recorded its biggest points gain of the year, just.

The blue-chip index has closed 134.5 points higher at 7,588 points, a jump of 1.8% today, and its biggest points gain since last November.

That’s one point more than its previous best day of 2023, last Wednesday (when the FTSE 100 gained 133.5 points, or 1.83%, after US inflation fell to 3%).

Housebuilders were among the big risers, along with financial services group Hargreaves Lansdown (+8.7%) which reported a rise in new business this morning, and warehouse operator Segro (+7%).

UK financial regulators have told MPs that Britain’s banks are not passing on higher interest rates to savers fast enough.

Financial Conduct Authority chief executive Nikhil Rathi told parliament’s Treasury Select Committee that:

“The pace has simply not been fast enough,”

Challenged about some of the “poor” rates available on easy access accounts from major banks, Rathi said there is a “long-standing” position that customers get the best rates from the building societies.

Digital and challenger banks tend to be close behind, while high street banks offer the poorest rates, he said.

The FCA isn’t a price regulator, Rathi points out.

But it does expect savings rates to improve as a new duty forcing banks to provide good outcomes for consumers comes into force.

Britain’s blue-chip share index is on track for its best day of the year, as the fall in UK inflation in June boosts confidence in the City.

The FTSE 100 index is now up 151 points, or 2%, at 7606 points – a one-month high.

That would be its best day since last October.

Hopes that UK interest rates will peak below 6% are spurring a strong rally in housebuilders, with Persimmon (+9.5%), Taylor Wimpey (+6.6%) and Barratt Development (+6.5%) in the top risers.

The money markets now believe the Bank of England is more likely to raise interest rates by a quarter-point next month, rather than by half a point as previously expected.

Looking further ahead, rates are expected to peak around 5.75%, rather than over 6%.

UK government bonds continue to rally (see earlier post), pulling down the yields used to price fixed-rate mortgages.

The drop in UK inflation to 7.9%, from 8.7%, has also sparked a strong rally in the UK-focused FTSE 250 index.

The FTSE 250, which contains smaller companies, is up 3.59%, its strongest day since February.

Investors are hoping that UK inflation has peaked, and will fall back towards levels seen in other major economies.

Danni Hewson, head of financial analysis at AJ Bell, says:

A further decline in inflation for July could really get the ball rolling for UK equities and lift them out of the mud. While the FTSE 250 is in party mode today, the rally only puts the index back to levels last seen in June.

“Housebuilders had been heavily sold off due to fears a sharp rise in interest rates would destabilise the housing market. While that’s certainly in motion, with plenty of people struggling with higher mortgage rates and a slowdown in property transactions, the valuations of housebuilders were effectively pricing in a deep rut.

Today’s inflation news has spurred investors with an appetite for risk to go fishing for bargains in the space in the hope that property market won’t experience a severe collapse.”

Rishi Sunak and Jeremy Hunt will be breathing a big sigh of relief at the latest inflation figures, our economics editor Larry Elliott writes.

On the face of it, there is not a great deal to crow about. At 7.9%, the annual increase in the cost of living as measured by the consumer prices index is still running at four times the government’s 2% target.

But for the first time in a while, inflation has come in below the level expected by the financial markets. That goes for headline inflation and core inflation, the measure that excludes volatile items such as food and fuel, and which came down from 7.1% to 6.9% in June. The City had thought headline inflation would drop to 8.2% and that core would remain unchanged.

Inflation in the service sector also fell last month, from 7.4% to 7.2%. That is significant not only since services make up about four-fifths of the economy’s total output but also because what is happening to the price of services is seen by economists as a guide to inflation generated by the domestic economy.

More here.

Australia’s Macquarie Group has tightened its grip on the UK’s energy sector today.

National Grid has sold a further 20% stake in its UK gas transmission and metering business to a consortium led by Macquarie Asset Management.

The sale is on the equivalent financial terms to the previous sale of 60% of National Gas to the Macquarie-led group, which was completed in January 2023

Martin Bradley, European head of infrastructure real assets at Macquarie, said the deal “underlines our commitment to National Gas and the critical role it plays in the UK’s energy system”.

Bradley added that Macquarie aspires to acquire the rest of National Gas “in due course”.

National Grid plans to use the £700m proceeds for general corporate purposes including repaying its debt.

Macquarie already owns a string of UK infrastructure assets including Southern Water, and in May it posted record profits after a boom in its commodities trading division. No wonder it’s been dubbed the “millionaire’s factory”, thanks to its bumper payouts to senior staff.

Macquarie’s has deep ties to the UK, having been created as a subsidiary to the British merchant bank Hill Samuel & Co in 1969.

It has faced criticism over its ownership of Thames Water, which was steadily loaded up with debt before Macquarie sold its final stake in the water operator in 2017,

Soaring inflation, and the banking sector’s tardiness in raising savings rates, could have wiped up to £113bn off the nation’s savings over the past year in real terms, analysis suggests.

PA Media has the details:

The analysis by investment platform AJ Bell was released after Office for National Statistics (ONS) said the Consumer Prices Index (CPI) eased to 7.9% last month, down from 8.7% in May and its lowest rate since March 2022.

Laura Suter, head of personal finance at AJ Bell, said: “Even though inflation has fallen today, savers are still being pummelled by high inflation and lower returns on savings.

“Although interest rates have risen considerably over the past year and a half, savers still lost money in real terms thanks to double-digit inflation for much of that period.

“Over the past year the average saver with £1,000 in an easy-access account will find it’s now worth £938 in real terms, having got an average of 1.18% interest over that period. The top-rate easy-access accounts would have paid more over that time, but nowhere near current inflation of 7.9%.

“Based on the £1.81 trillion that Brits have in savings accounts, it means the nation’s savings could have collectively lost as much as £113 billion over the past year in real terms, based on current inflation and assuming savings were earning the average easy-access rate.

“Although some of that money will have been in fixed-rate accounts earning higher interest, a large proportion will also have been in accounts earning zero or minimal interest.

“We know that £250 billion of savers’ money is sitting in accounts earning no interest, with that money alone losing £18 billion in real terms.”

Oil giant BP has been fined £650,000 over health and safety failings after a worker fell through an open grating on an offshore platform into the sea and died.

Sean Anderson, 43, sustained fatal injuries when he fell through the grating on the lower deck of BP’s Unity installation on September 4 2014.

Following an eight-day trial at Aberdeen Sheriff Court, BP Exploration Operating Company Ltd was found guilty of a health and safety breach.

During the trial, the prosecutor led evidence showing that the company had failed to have suitable and sufficient control measures in place in respect of open gratings on the lower deck.

Debbie Carroll, who leads on health and safety investigations for the COPFS (Crown Office and Procurator Fiscal Service), said BP Exploration Operating Company Ltd could have done more to address the risks.

She explained:

“Sean Anderson’s death was entirely foreseeable and could have been avoided if BP had taken all reasonably practicable precautions.

“His death and the risk of fatal injury to which others were exposed cannot be understated.

“There were serious deficiencies in the safety arrangements adopted around the management of open gratings which BP should have identified.

A BP spokeswoman said:

“We acknowledge the outcome of the court proceedings.

“This was a tragic incident. While we know nothing can be said to change the pain felt by Sean Anderson’s family and friends, our deepest condolences remain firmly with them to this day.”

Here’s a breakdown of what the fall in UK inflation, from 8.7% per year to 7.9%, means in practice:

Away from inflation, the UK’s competition regulator has provisionally cleared semiconductor designer Broadcom’s $69bn deal to buy cloud computing firm VMware.

The Competition and Markets Authority (CMA) has concluded that the deal would not weaken competition in the supply of critical computer server products.

In March, the CMA raised concerns that the deal could make servers more expensive, prompting an in-depth investigation.

But it has now concluded that it would not make financial sense for Broadcom to make its rivals products work less well (or not at all) with VMware’s server virtualisation.

It also found that there isn’t a danger that Broadcom would see commercially sensitive information from its rivals, which they share with VMware.

Richard Feasey, chair of the independent inquiry panel carrying out the investigation, said:

Computer servers – often using the products of Broadcom and VMware – play a critical role in enabling us to work in the office or at home or to access TV shows or use banking services.

That’s why it’s important we investigate this deal to ensure that UK businesses continue to benefit from competition and innovation in the supply of server components. After carefully considering a broad range of evidence, we have provisionally found that this deal would not harm competition.

We’ve just had confirmation that inflation was lower in Europe than in the UK last month.

Eurozone inflation was 5.5% in the year to June, statistics body Eurostat reports, matching its initial estimate, down from 6.1% in May.

Across the wider European Union, the inflation rate was 6.4% in June.

The lowest annual rates were registered in Luxembourg (1.0%), Belgium and Spain (both 1.6%).

The highest annual rates were recorded in Hungary (19.9%), Slovakia (11.3%) and Czechia (11.2%).

As in the UK, food inflation slowed in Europe last month while energy prices fell year-on-year.

But, core inflation in the eurozone rose.

Underlying prices, stripping out energy, food, alcohol & tobacco, rose by 5.5% per year last month, up from 5.3% in May, and higher than the initial estimate of 5.4%.

In the UK, we learned earlier, core inflation fell to 6.9% from 7.1%.

“Boom! We’ve just seen the strongest daily movement in UK mid cap stocks since February, with the FTSE 250 index initially jumping 3% on news of inflation cooling more than expected in June,” reports says Danni Hewson, head of financial analysis at AJ Bell.

Hewson explains:

The FTSE 100 advanced 1.3% to 7,548 – a positive move but less pronounced than the FTSE 250 because the blue-chip index has less exposure to the UK economy.

“The inflation reading has dampened the outlook for interest rate hikes in the UK, much to the excitement of investors. Two-year gilts fell from 5.079% to 4.842%, sterling fell 0.7% to $1.2937 in the space of 20 minutes and interest rate-sensitive stocks soared on the news.

“Housebuilders, including Crest Nicholson, saw gains of up to 7%, while commercial real estate companies such as British Land were close behind, and UK banks advanced by 2% to 3%.

“Investors are taking the view that if inflation is on a sustained downward path, then the Bank of England might be less eager to keep pushing up interest rates.

The market is desperate for that pivot moment where central banks call the end to the current rate rise cycle.

The rents paid by UK tenants have increased at the fastest rate since at least seven years, the Office for National Statistics reports.

The ONS says that the private rental prices paid by tenants in the UK increased by 5.1% in the 12 months to June, the largest annual percentage change since its data began in January 2016.

In England, private rental prices increased by 5.1% in the 12 months to June, or by 4.9% if you exclude London (where they rose 5.3%).

Rent rose by 5.8% per year in Wales, up from 5.0% in May 2023, and the highest annual percentage change at least 2010 (when the Wales data series began).

Private rental prices in Scotland increased by 5.5% in the 12 months to June 2023.

The ONS has also reported that average UK house price inflation has slowed, with prices rising by 1.9% in the 12 months to May, down from a 3.2% rise in April.

But prices were £7,000 below the recent peak in September 2022.

UK inflation fell further than expected in June to 7.9% amid a sharp fall in petrol prices, easing forecasts for how aggressively the Bank of England will need to raise interest rates over the coming year.

The Office for National Statistics said the annual inflation rate as measured by the consumer prices index resumed a downward path after unexpectedly sticking at 8.7% in May.

The drop exceeded City forecasts for a decline to 8.2%.

Financial markets responded to the figures by betting that the Bank of England would no longer drive interest rates above 6% early next year.

Raising further hopes of relief for mortgage holders, markets also predicted that the central bank would introduce a more modest quarter-point rise in borrowing costs at its next policymaking meeting in August instead of a tougher half-point increase from the current level of 5%.

Marcus Brookes, chief investment officer at Quilter Investors, has described today’s inflation figures as a “glimmer of light.”

But, Brookes also warned the UK is still a “drastic outlier” among developed countries when it comes to inflation.

He writes:

While the rate of the price rises has dropped to 7.9%, this is still far above where the Bank of England wants it to be before it can even consider a pause in the rate hikes we have become accustomed to.

“Frustratingly, while also beating expectations core inflation is remaining persistently stubborn and refusing to budge significantly. It may be that finally the well-known lags in the effect of interest rate rises are beginning to have an effect, but it still remains very sticky so way too early to begin celebrating.

“Demand has withstood both inflation and the rise in rates, but cracks are appearing, and as more mortgage holders get exposed to the current rates, the economy is likely to be hit as a result.

“This is unfortunately the path that is likely going to have to be taken in order to get inflation back down to target. The Bank of England has raised rates considerably, and shows no sign of slowing down and thus we are probably on a path to recession in 2024.”

There’s drama in the bond market too this morning, which could benefit those looking to remortgage in the months ahead.

The price of UK government bonds is surging, driving down the yield (or interest rate) on these gilts.

The yield on a two-year UK bond has dropped to 4.8%, down from over 5% last night – and a 15-year peak of 5.5% earlier this month.

That’s significant, as two-year gilts are used to price the cost of fixed-rate mortgages.

Neil Wilson of Markets.com says:

Annual CPI inflation declined to 7.9% in June from 8.7% in May, in what’s probably a huge relief for Threadneedle St [the Bank of England].

Core inflation was also down.

It doesn’t really matter too much what the finer details are and what the actual number is as far as markets are concerned, it’s all about the direction; and it’s going the right way.

Gilt yields fell sharply with the 2yr back to a one-month low at 4.833%, dropping ~25bps on the session for its biggest drop since March, having traded near 5.50% two weeks ago. It cements the market’s disinflation narrative.

Longer-dated UK government bonds are also rallying, reflecting renewed hopes that inflation will fall faster than feared, meaning interest rates will peak below 6%.

However, Moneyfacts has just reported that average mortage rates have risen this morning, following two days where they remained unchanged.

They say:

• The average 2-year fixed residential mortgage rate today is 6.81%. This is up from an average rate of 6.78% on the previous working day.

• The average 5-year fixed residential mortgage rate today is 6.33%. This is up from an average rate of 6.30% on the previous working day.

Clearly it’s too early for mortgage lenders to have reacted to this morning’s inflation report, but borrowers will be hoping to see rates fall in the days ahead, given the moves in the bond market….

Shares are rallying strongly in the City, as traders cheer the larger-than-expected drop in UK inflation to 7.9% in June.

The blue-chip FTSE 100 index hit its highest level since 21 June in early trading, and is currently up 93 points or 1.2% at 7,547 points.

Housebuilders are among the top risers, reflecting hopes that interest rates will not be raised to 6% or higher as feared.

Barratt Development, Persimmon and Taylor Wimpey have all jumped around 5%, helped by the falling expectations for UK interest rate rises.

Victoria Scholar, head of investment at interactive investor says:

“European equities have opened in the green and the FTSE 100 back above 7,500 with UK inflation figures in focus.

Housebuilders are at the top of the UK index, hitting a one-month high, thanks to a softer-than-expected CPI reading.

The FTSE 250 index, which contains smaller companies and is more UK-focused, has surged by around 2.5% this morning with nearly every stock rallying.

Traders will be hoping that the Bank of England does not need to hike borrowing costs as fast as feared, meaning less damage to the UK economy.

Grant Shapps, the Secretary of State for the Department for Energy Security and Net Zero, has welcomed the drop in UK inflation to 7.9% this morning.

He told BBC Radio 4’s Today programme that inflation was effectively a tax on households and businesses:

“I think we have to stay the course and I welcome the drop this morning, 7.9%.

But of course, that’s still prices 7.9% higher than they were a year ago. This is a very important, significant, effectively tax on households and businesses in this country.

And we want to see it continue to fall. So we’re going to carry on following the plan, which is now working, we’ve come down from 11.1% I think at its peak, and make sure that we support the process, support the bank in the work that they’ve been doing. But also things like the energy price guarantee over the winter were big supports. We’re now seeing energy prices fall and that’s leading to lower inflation as well.”

Shapps added that nine other EU countries had higher inflation rates than the UK.

He also poined to the tight UK labour market as one factor pushing up inflation:

“I think our uniqueness in Europe has been, one of the key aspects has been, we’ve got both the threat that Putin posed from using energy as blackmail, but also incredibly low, tight employment market in the UK, where unemployment is so low, and in fact, we have record numbers of people in work.

So I think that’s made our inflation stickier, but very good to see it come down today.”

Finally, we have some good news on UK inflation. says James Smith, developed markets economist at ING.

Smith writes:

Headline CPI has dropped back to 7.9%, below consensus and almost a full percentage point lower than in May.

Much of that can be put down to petrol and diesel prices, which fell by 2.6% across the month – a stark difference to the same period last year, where we saw a near-10% spike amid the ongoing fallout of the Ukraine war.

But encouragingly, we also saw a marked slowdown in food inflation.

These prices increased by 0.4% on the month, which looks like the slowest month-on-month increase since early 2022. This is a trend that should continue, given that producer prices for food products are now falling on a three-month annualised (and seasonally-adjusted) basis.

Smith says the August Bank of England meeting is “going to be a close call”, but today’s data makes a 25bp hike (a quarter of one percentage point) more likely than a repeat 50bp increase.

He explains:

The Bank will also be looking at the recent wage data, which was stronger than expected but came alongside figures showing a renewed cooling in the jobs market and improvements in worker supply.

The risk is that the BoE applies a similar logic to that seen in June. This could mean that if it expects to hike again in September, then it might as well opt for a larger 50bp hike in August. We certainly wouldn’t rule this out.

In the City, investors are rethinking how high the Bank of England will need to raise interest rates, now that inflation has dropped by more than expected to a 15-month low of 7.9% in June.

The money markets now think there is a 65% chance that the Bank only raises rates by a quarter-point, from 5% to 5.25%, at its meeting in early August.

A larger, half-point, hike next month is seen as a 35% chance.

Last night, the odds were the other way around – with a half-point rise seen as a 58% chance (as flagged earlier).

Looking further ahead, UK interest rates are now seen peaking at around 5.8% in February 2024, down from around 6% yesterday.

Earlier this month, the markets had priced in rates rising as high as 6.5% by March.

Mohamed El-Erian, chief economic advisor to Allianz, says this is good news for mortgage holders.

Paul Dales, chief economist at Capital Economics, says:

Overall, the UK will probably still have higher rates of inflation than elsewhere for a while yet, but at least the UK is now following the global trend. Our forecast is that core and services CPI inflation will both ease gradually as the effects of the previous rises in interest rates are felt.

But with wage growth and services CPI inflation both currently stronger than the Bank had expected back in May, we think there is enough evidence of “more persistent pressures” to prompt the Bank to raise interest rates a little bit further than we previously thought.

Even so, we think rates are more likely to peak between 5% and 6% than between 6% and 7%.

Shadow chancellor Rachel Reeves points out that an inflation rate of 7.9% still means prices are rising at ‘staggering rates’.

That’s an important point – falling inflation does not mean prices are falling (just that they are rising less rapidly).

Reeves says:

“Inflation has been persistently high and remains higher than our international peers. This is becoming a hallmark of Tory economic failure.

“Today’s numbers confirm what families across the country already know – that prices are still going up at staggering rates and that they’re bearing the brunt of those costs.

“There may be global shocks – but Britain is so exposed to those because of Tory economic failure that has led to a severe lack of security in our economy.

“Only Labour has the plans Britain needs to put our economy on a more secure path – so that families are better off and so we can grab hold of the opportunities of the future.”

Sterling has dropped sharply in the foreign exchange markets, as investors react to the drop in UK inflation in June to 7.9%.

The pound has lost almost a cent against the US dollar to $1.2940, down from $1.3034 last night.

That suggests the City are expecting that fewer increases in interest rates may be needed to cool UK inflation….

Importantly, underlying inflation has dropped in June too.

Core CPI, which excludes energy, food, alcohol and tobacco, rose by 6.9% in the 12 months to June 2023, down from 7.1% in May (which was a 30-year high).

Economists had expected core inflation would stick at 7.1%, so this could encourage the Bank of England that inflationary pressures are a little less sticky than feared.

But, the Bank’s target is to bring headline CPI inflation down to 2%, so policymakers could still press on with interest rate rises in the month ahead…

Here’s a chart showing how UK inflation has fallen to its lowest level since March 2022 (when it was 7%) last month, away from the peak of 11.1% hit in October last year.

Falling prices for motor fuel helped to push the UK inflation rate down in June, the ONS says.

Food prices rose in June 2023 but by less than in June 2022, also leading to an easing in inflation.

Office for National Statistics (ONS) chief economist Grant Fitzner says:

“Inflation slowed substantially to its lowest annual rate since March 2022, driven by price drops for motor fuels. Meanwhile, core inflation also fell back after hitting a 30-year high in May.

“Food price inflation eased slightly this month, although it remains at very high levels.

“Although costs facing manufacturers remain elevated, especially for construction materials and food items, the pace of growth has fallen across the last year, with the overall cost of raw materials falling for the first time since late 2020.”

Newsflash: UK inflation has fallen to a 15-month low, but still remains at painfully high levels.

The consumer price index rose by 7.9% in the year to June, new figures from the Office for National Statistics show, down from 8.7% in May.

That’s the lowest reading since March 2022.

It’s a larger fall than expected, with City economists having predicted a fall to 8.2%, which will cheer policymakers at the Bank of England.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Tension is high in the City, and in Westminster, this morning as we await the latest UK inflation report, due at 7am.

June’s CPI report is expected to show that price rises slowed last month. Economists predict that the annual inflation forecast will dip to 8.2% from 8.7% in both April and May.

That would be the lowest reading in 15 months, since March 2022.

City economists predict that food and fuel provide the drag on inflation last month, as we catch up with the sharp price rises in summer 2022.

Yesterday, data from Kantar showed that grocery price growth cooled to 14.9% per year in over the four weeks to 9 July.

But while a fall in inflation would be welcome, prices have been rising much faster than the Bank of England’s 2% inflation target for around two years.

Traders will also be watching for the latest core inflation reading, which is expected to remain at a 31-year high of 7.1%. That would maintain the pressure on the Bank of England to keep raising interest rates this year.

On Monday, prime minister Rishi Sunak acknowledged that inflation is not coming down as quickly as he would like (as his target to halve it by the end of the year, to around 5%, looks more challenging).

Sunak told LBC:

“Inflation is prices going up, and they are all going up faster than we would like.

“That’s what is eating into people’s pay packets, it’s what’s eroding their savings, it’s what’s putting up interest rates and putting pressure on mortgages.

“So, the best way to help people with the cost of living … is to bring down inflation.

We’re about to find out how much progress has been made….

Also coming up today

Jaguar Land Rover-owner Tata is expected to announce it will build its flagship electric car battery factory in the UK, in a major boost for the British car industry.

The new plant in Somerset is likely to be officially announced on Wednesday, backed with £500m in government funding,

The agenda

• 7am BST: UK inflation report for June

• 9.30am BST: UK house price index for May

• 10am BST: Final estimate of eurozone inflation in June

• 1.30pm BST: US building permits for June

• 2.15pm BST: Treasury Committee to question Financial Conduct Authority on topics including mortgages and savings

• 4pm BST: Business and Trade committee hearing on the road fuel market with the CMA and Mohsin Issa CBE, co-owner of Asda.