Inflation adds to cluster of fiscal headaches

Commenting on today’s increase, the highest since January 2024, Kevin Brown, savings specialist at Scottish Friendly, said:  “It is difficult to see what else could go wrong for the Chancellor as inflation data for June came in ahead of expectations. Combined with economic growth going backwards, the environment is starting to look distinctly stagflationary.

“Rising prices also give the Monetary Policy Committee (MPC) less flexibility on interest rate cuts. It had been hoped that the base rate might be cut at the start of August, but this now looks less likely. It means households may not get the tailwind of falling mortgage costs they’d hoped for.

“The weakness in the economic data is likely to prompt further speculation on how the Chancellor could raise revenues in the Autumn Budget. Proposals currently on the table include changes to the pension regime, a wealth tax, freezing personal allowances or tinkering with the VAT thresholds.

“No one has a crystal ball, but it’s nonetheless clear to see that investors need to be realistic about what may be coming down the line and protect their savings wherever possible.”