Latest UK inflation figures on Wednesday sent some cheer through the property market as the share price of REITS rose, but still some suspect more interest rate rises are on the way.
UK CPI inflation rose by 7.9% in 12 months to June, down from 8.7% in May, a sharper fall than expected (8.2% forecast).
The news was pounced by financial investors. British Lands' shares ended the day 10% up. Land Securities was up 7.65%. Segro was up 6.8%. Tritax Big Box ended 7% to the good, and Unite Group 5%.
Chris Daniels, chief commercial officer of SmartSave, which is part of Chetwood Financial, however was among those with warnings. He said: ‘Today’s data confirms what we already knew - although inflation dropped more than expected, it is not falling fast enough, and the Bank of England may have to raise interest rates again.'
Giles Coghlan, chief market analyst, consulting for HYCM, said: ‘Bank of England policymakers will be setting the scene for yet another rate hike on 3 August after today’s inflation reading. As the headline figure was stagnant at 8.7% throughout both April and June, today’s modest decline to 7.9% may signal to investors that economic pressures are gradually easing. However, core inflation continues to be a thorn in the central bank’s side at 6.9%, highlighting the risk that domestic inflationary pressures are here to stay for now.’
He added, ‘Implications of this inflation reading go beyond just numbers on a chart. As stagflation fears loom larger, the GBP may face downwards pressure from that quarter too. The persistence and increasing severity of UK inflation could amplify worries about the country’s economic health on the world’s stage, potentially leading to a decline in the GBP’s value.’
