Key Points
Inflation remained at 2% in June 2024, the lowest in almost three years.
The Bank of England has a 2% inflation target and raised interest rates to 5.25% to curb inflation.
Rates were recently cut to 5%, but Governor Bailey warns against cutting too quickly.
Core inflation (excluding food and energy) remains high at 3.5%.
Wages need to keep pace with inflation to maintain purchasing power.
Other countries are also experiencing inflation and higher interest rates.
The Bank will need to carefully balance its approach to interest rates to ensure inflation remains under control while supporting economic growth.
The initial surge in inflation was due to increased demand for oil and gas post-pandemic and the energy price surge following Russia's invasion of Ukraine.
High food prices also contributed to inflation remaining above the target.
While food prices have now decreased, certain sectors like services are still experiencing significant price increases.
Worker shortages have driven up the cost of finding and retaining staff.
The IMF has warned that persistent inflation in countries like the UK and the US might necessitate keeping interest rates higher for longer.
This summary is shorter than the previous version but still provides key information about UK inflation.