Despite falling energy costs at home and at the pump, rapidly rising prices for food and servicing mortgage and rent costs don’t mean consumers are better off as expenditure outstrips any income growth.”Īfter more than a year of this trend, it should be of concern that consumers are likely to still be working with tight budgets, but Staton is optimistic about the potential response. Joe Staton, client strategy director at market research company GfK said: “You don’t need to dig deep into the headlines to see that many persistent pressures remain. However, Badiani did say that inflation is expected to fall steadily from mid-2023 onward, which should allow for interest rates to fall from early 2024 onward, predicting a fall to 2.5% by mid-2025. Interest rates increased earlier this year from 4.25% to 4.5%, making borrowing more expensive for both businesses and consumers. ![]() We now expect the policy rate to rise by 25 basis points to 4.75% at its next meeting on 22 June while acknowledging the rising probability of a further hike in early August.” Raj Badiani, principle economist at S&P Global Market Intelligence, told Marketing Week: “Rising service and core inflation in April suggests the Bank of England has little option but to continue its current tightening cycle. “Food inflation is particularly challenging as it is one of the most transparent indicators of living costs and often a catalyst to cut back spending elsewhere.”Īnother concern for UK businesses is whether the Bank of England will now increase the base rate of interest in June, making borrowing more expensive. “Overall inflation appears to have peaked but the reality is that there’s still more pain to come,” Richard Lim, CEO at research consultancy Retail Economics, explained. Chancellor Jeremy Hunt said that these rates are “worryingly high”. The rate of inflation on groceries overall was at 19.1% in April. Inflation on staple household items, including sugar, milk and pasta, continued to increase at near record rates last month. Secondly, the cost of food is rising faster than other essentials. Prime Minister Rishi Sunak has promised to bring it down to 5% before the end of the year. The Bank of England had predicted it would fall to 8.2%. Firstly, the drop in inflation is not as steep as expected. ![]() In reality, budgets are still likely to be tight for both consumers and businesses for some time yet. ![]() On the surface, this seems like good news. Last week, the consumer prices index (CPI) announced inflation in the UK fell to 8.7% in April, down from 10.1% in March.
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