IoD press release  Inflation softens further, but will rise in the coming months

“Inflation has weakened once more in June, with food price inflation dropping back notably and energy price inflation dipping as well. This should secure another interest rate hold from the Bank of England next week. However, they will remain on alert to the ongoing disruptive impacts from renewed conflict in Iran, which will push up inflation later in the year.

“Recent policy decisions will apply modest downward pressure to inflation, including various measures to reduce household electricity bills, bus fares and encourage spending over the summer holidays. Measures that reduce the price of electricity relative to fossil fuels by shifting policy costs into general taxation are the right steps needed to hasten electrification and reduce the UK’s vulnerability to fossil fuel price volatility. This process has begun for households and now needs to be extended to businesses too.

“However, these policy decisions will have only temporary effects on inflation, although they may be helpful in tempering inflation expectations. The reality is that inflation is expected to increase further in coming months, and government policy can only alleviate that in the short-term – not undo it. As we head towards the Autumn Budget, policy will need to look to the long-term. An effectively directed state with a business environment which supports investment and employment can help drive a strong economy and better living standards across the country.”