Grocery price inflation was 1.6% in the four weeks to 7 July, compared to 2.1% in the previous four-week period, according to data from Kantar
Food price inflation slowed to its lowest level in three years, leading traders to price in two base rate cuts before the end of the year, taking this as a sign of easing cost pressures across the UK economy.
Grocery price inflation was 1.6% in the four weeks to 7 July, compared to 2.1% in the previous four-week period, according to data from Kantar. This was its lowest level since September 2021.
The figures come ahead of a key rate decision by the BoE next month, as pressure mounts on the central bank to follow the ECB and reduce the base rate.
Money markets are now pricing-in that the BoE will lower borrowing costs two times before the end of 2024.
They are also betting there is a 51% probability that the central bank’s Monetary Policy Committee (MPC) will announce its first interest rate reduction in four years at its 1 August meeting.
The base rate has stayed at a 16-year high of 5.25% since last August. The last time the base rate was reduced was in March 2020.
New Chancellor Rachel Reeves said the Bank of England is “rightly independent,” but should consider a rate cut.
Of course, I know that many people who have been struggling with higher mortgage rates after the Conservatives’ mini-Budget just under two years ago, would welcome some relief with lower mortgage costs, said the Chancellor in comments to the Times on Monday.
Swati Dhingra, widely seen as the most dovish member of the Monetary Policy Committee, also again called for a rate cut.
I do not see some kind of consumption boom, she told The Rest is Money podcast this week.
Dhingra said: Now is the time to start normalising so that we can then finally stop squeezing living standards the way we have been to try and get inflation down.