Bulletin: Inflation forecast and interest rates
20 June 2024Featuring a general election update, new Viewpoint report, food inflation, inflation, interest rates and investment.
General election update
With two weeks to go before the general election, the latest opinion polls are predicting a change of government. Whatever the outcome of the actual vote on 4 July, register your interest in receiving our NEW Viewpoint report. The report will help you to:
Understand how the results of the general election will impact the food and consumer goods industry
Understand the economic landscape the new government will inherit and gain an overview of consumer sentiment and government policy outlook
Food inflation forecast
Food and drink inflation fell quite sharply from 2.9% in April to 1.7% in May, which is the lowest rate since October 2021. Alcohol and tobacco inflation fell from 8.1% to 7.8% and foodservice inflation fell from 5.7% to 5.4%.
Be the first to receive our NEW food inflation forecasts - Last year, food inflation reached 19%. What is the forecast for 2025? Our Viewpoint report launches on 11 July.
Inflation low
The latest data from the ONS shows that all items inflation fell from 2.3% year-on-year in April 2024 to 2.0% in May, when measured by the CPI method. This is the lowest level in almost three years.
Read our inflation article for more details.
IGD Opinion
Millions of hard-pressed UK households will welcome a further fall in inflation – although there is little sign that the cost of living is actually falling.
Looking ahead, it is likely that the downward “leg” of inflation is coming to an end and that inflation will soon level off at or near the current rate.
Interest rates
The Bank of England Monetary Policy Committee (MPC) has decided to hold interest rates at 5.25%. This decision comes at a time of ongoing inflation for services, influenced by ongoing pressure on wages. The Bank of England’s governor, Andrew Bailey commented “We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25% for now.”
IGD Opinion
The MPC has been extremely cautious in reducing rates and significant cuts in the near future seem unlikely. This is due to the uncertain path of inflation. The Bank of England needs to be convinced that inflation is totally under control.
Low investment
A new report by the Institute for Public Policy Research (IPPR) reveals that the UK still has the lowest business investment in the G7. IPPR calls on the next government to commit to an industrial strategy.
Dr George Dibb, associate director for economic policy at the IPPR commented “Without resources flowing into new investment, it's hard to see how UK economic performance can improve."