Inflation fell to 2.6%, official figures show


The UK’s inflation rate saw a startling tumble to 2.6% last month, down from 2.9% in May, official figures reveal.

It is the first decline in the rate since last October and was chiefly down to a fall in fuel costs in both petroleum and diesel, the Office for National Statistics reported.

Inflation has been ascending since the Brexit referendum the previous summer, driven by the falling value of Sterling making the cost of imported products more costly.

Lucy O’Carroll, chief economist at Aberdeen Asset Management, said: “These numbers are a real surprise, showing the first drop in inflation since autumn 2016.”

“This is going to kill the chances of a rate rise in the short term. We’ll learn more about the Bank of England’s thinking in a couple of weeks, but we can expect the calls for a rate rise to reduce to a whimper.”

Britain’s labourers have been caught amidst higher expenses of food, shelter and services while being pressed on the opposite side of stagnating wage growth.

Dropping inflation is to be embraced, but as Danske Bank economy-expert Conor Lambe says: “The latest labour market data showed that the rate of nominal wage growth over the year to March-May 2017 was 2%. Therefore, despite today’s fall in the inflation rate, real wage growth is still in negative territory.”

Sterling plunged a full penny against the dollar as a prompt response to the news, hitting $1.3020 as dealers balanced their position on likely interest rate increases. It had recouped moderately by noontime. Additionally, the pound fell about 1% against the euro to €1.1271.

After an initial drop on the FTSE 100, the share index regained. The response of the FTSE is normally the opposite of sterling, as a weaker pound helps the value of foreign earnings of the global organisations in the index.