After almost three years of steady prices, UK stores have witnessed a reduction in prices. This comes as the Bank of England’s decision-makers consider more slashing of the interest rates. Global harvest yields and geopolitical uncertainties make the future of commodity prices unsure, hinted Helen Dickinson, BRC’s CEO. This instability suggests potential revival in inflationary forces in the year ahead.
The need for UK retailers to clear out summer clothing and home items due to gloomy weather conditions triggered the price drop, according to Dickinson. The cautionary approach adopted by consumers towards spending, as a result of sky-high inflation creating the most severe cost-of-living crisis in a generation, continues.
Earlier this month, the Bank of England lowered rates for the first time since 2020, a 16-year high. The Bank hinted at future rate reductions, though the timing and speed of these, hinges on the coming months’ economic performance. Market traders are predicting at least one additional rate cut this year, with November being the likely month.
On the last Friday, the Sterling pound saw its value climb to the highest level against the US dollar in over two years. Federal Reserve Chair Jerome Powell’s insinuation about a potential US rate drop in September prompted this increase.
Andrew Bailey, the Governor of the BOE, emphasized at Jackson Hole on Friday that it’s premature to claim that the inflation fight has been won. However, he also noted that the possibility of lingering inflation seems to be diminishing. In the midst of global harvest results and geopolitical tensions, the future of commodity prices remains unpredictable, according to Dickinson. She further suggested that there might be a resurgence of inflationary pressures over the coming year.