Investors remain cautious despite inflation easing
Inflation in Britain slowed to 2.6% on an annual basis in June, marking the lowest level in over a year. However, this did not reassure the markets, as concerns over rising oil prices, which exceeded $90 per barrel, overshadowed the economic data. Markets were affected by expectations of future interest rate hikes by the Bank of England of around 50 basis points, as soaring energy prices are expected to sustain inflationary pressures—particularly in light of increasing government spending and political uncertainty surrounding fiscal policy. This has put pressure on UK government bonds, whose yields have surpassed 5%. Analyses suggest that rising oil prices could complicate the goal of reducing inflation to 2%, with the potential for these increases to spill over into service prices and wages, thereby prolonging inflationary pressures.
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