Last month, underlying inflation reached its highest point in 31 years, potentially impacting mortgage holders in light of the upcoming Bank of England’s interest rate decision.
Despite economists predicting a decrease to 8.4pc, the consumer prices index remained steady at 8.7pc in May.
Conversely, core inflation, which excludes fluctuating components such as food and energy prices, rose to 7.1pc from 6.8pc in April, marking its peak since 1992.
The Bank of England’s decision-makers, who will gather to determine interest rates tomorrow, typically pay closer attention to core inflation figures as opposed to the general inflation rate.
The Monetary Policy Committee is largely anticipated to hike rates by 0.25 percentage points, stirring speculation in the markets about a potentially larger increase and the extent of future rate hikes.
This development comes at a time when homeowners are grappling with escalating borrowing costs. As reported by Moneyfacts on Tuesday, the average rate for a two-year fixed mortgage deal rose to 6.07pc.
Pound falls amid gilts sell-off
The pound experiences a decline amidst gilts sell-off Following a surprising surge in inflation data that resulted in an up to 3.8pc increase since June’s start, the pound has suffered a further decrease today.
Sterling dipped 0.3pc against the dollar, moving towards $1.27 after peaking above $1.28 earlier this month for the first time since April.
This decline occurs in conjunction with a UK gilts sell-off, as traders anticipate a sharp rise in interest rates, potentially nearing 6pc by year-end.
In relation to the euro, the pound has also seen a 0.3pc reduction, as the single currency approaches 86p.
