No dancing with joy just yet to the tune of decreased inflation

THE fall in CPI inflation from 8.7% in May to 7.9% in June announced on Wednesday morning may have got the Prime Minister and the Governor of the Bank of England dancing for joy around their respective breakfast tables. But there is a long way to go before they can take a bow.

- Paul Dales

Any musical shapes thrown by Rishi Sunak and Andrew Bailey yesterday morning (I'll leave you to imagine if their styles are more Michael Gove or Theresa May) were probably partly because they know that inflation will almost certainly take another big step down in July. Due to the fall in the Ofgem price cap that lowered utility prices for all households from July 1, I suspect that CPI inflation in July will fall to around 6.5%.

That would leave the Prime Minister on track to meet his pledge to halve inflation from 10% to 5% this year. And it would mean that instead of being more than five times the Bank of England's 2% inflation target, inflation would suddenly be "only" three and a bit times the target.

That said, there are five reasons why Sunak and Bailey will probably be dancing on their own for a while yet.