UK inflation remains unmoved at 2% in June: what this means for your money

While prices are still rising, the rate of inflation remains in line with the Bank of England’s (BoE) 2% target.

Prices in restaurants and hotels increased, with prices for the latter rising more than a year ago, although falling prices for clothing helped offset this.

“BoE policymakers may be cursing Taylor Swift, as fans spending on hotel rooms and in restaurants during her Eras tour is likely to be one reason that prices rose in June, meaning that overall inflation flatlined at 2% rather than fell,” comments Laura Suter, director of personal finance at AJ Bell.

While it’s positive that inflation hasn’t risen, it does leave the odds of the base rate being cut in August at 50%.

“All eyes will now be on tomorrow’s wage figures as a further indicator of whether the Bank will start its rate-cutting cycle in a couple of weeks.

“But hot on the heels of strong GDP figures and a warning from the International Monetary Fund that rates may have to stay higher for longer in the UK, some will be forecasting no cut this summer,” Suter added.

What unmoved inflation means for savers

As inflation has remained unmoved, generous savings rates may not be cut - yet.

Inflation is 2% while top savings rates are up to 5.5%, so savers can still easily beat it if they opt into a savings account with a fixed rate, so their money doesn’t lose value in real terms.

However, if UK wage growth appears to be slowing when data is released this week, it may increase the chance of a base rate cut in August.

If so, savings rates could start to fall, so it’s worth shopping around for a fixed-rate deal now to take advantage.

What unmoved inflation means for homeowners

Homeowners have had a difficult time this year as mortgage rates have been volatile, rising and falling without much warning.

There is currently a mortgage price war as many major lenders have been reducing their rates due to an anticipated base rate cut.

While mortgage rate reductions may continue, this is not guaranteed, as many factors, such as UK wage growth and swap rates, can impact expectations of what the BoE will do next.

What unmoved inflation means for annuities 

If you’re retired or hoping to quit working soon to enjoy your golden years and are considering an annuity, it’s wise to evaluate the impact of the base rate on annuity rates.

Over two years, annuity rates soared 14%, driven by base rate rises. So, if a base rate cut becomes more likely, it could impact your rate and the fixed income you receive.

It might be worth considering an annuity while rates are still favourable. You can also get inflation-linked ones that’ll protect your income from rising prices.

Whether you’re planning for retirement, buying a home, remortgaging, or investing, it’s worth considering financial advice.

Unbiased can quickly connect you with a qualified financial adviser who can help you get the most out of your money, whether you’re hoping to retire, invest, or plan for your future goals.