CPI inflation will still rise over the next six to nine months despite it holding steady at 2.8% in May. But the fall in the oil price ahead of a US-Iran deal means it’s becoming more likely that inflation won’t rise quite as far as our forecast of just above 4.0% and will fall to 2.0% next year. This can give the Bank of England more confidence that it doesn’t need to raise interest rates from 3.75% tomorrow, or at all. In fact, we think the Bank will cut rates to 3.00% next year.
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