The headline rate of inflation fell to 7.9% in June, the lowest it has been in more than a year. Inflation had been predicted to fall from the rate of 8.7% seen in May to 8.2%.

The market immediately divested itself of long Sterling positions, believing that the fall in the rate of inflation means that the Bank of England is less likely to feel the need to add a further fifty basis points to the base rate of interest.

While this is one scenario, the Bank may also consider that having seen the effect of a larger-than-expected hike last month, they may feel empowered to “repeat the dose.”

The Chancellor welcomed the news, saying that the Government understands that high price increases are still a huge worry for households and businesses.

The fall in the rate of inflation has seen forecasts for the peak in the base rate drop from 6% to 5.75%. It is going to be difficult to predict the further seventy-five basis points that are predicted to be added will be in the twenty-five-point hikes or another fifty, followed by twenty-five a little later in the year.

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