Rate-setters may want to assess the impact of any measures announced by the new Prime Minister before deciding whether to tighten policy again,
she said, adding that rising inflation could likely become a more notable economic headache.
Thiru specifically referenced the new Prime Minister, Healey, noting that inflation risks squeezing his fiscal headroom, raising borrowing costs, and increasing financial market volatility.
Inflation Slows, But Energy Costs Loom
The latest inflation figure is still above the Bank of England’s target of 2%, according to the source. However, Yael Selfin of KPMG warned that energy bills, driven by Ofgem’s price cap, could reignite inflation. Although the impacts from the initial energy shock have so far been relatively limited, if energy prices remain high for longer, second-round effects risk feeding through into wages and more broadly across the economy,
she explained. Selfin also noted that the June inflation figure is likely to be the lowest of the year.
Meanwhile, Sarah Coles of AJ Bell highlighted the implications for consumers. The markets are still only expecting a single rate hike by the end of 2026, but it's expected to hit in September, with another potentially following in February,
she said. This means the most generous rates are likely to edge up. If you're in the market for a new savings account, it's worth keeping your eye open for a bargain and acting fast while it lasts.
The report also underscored the challenges facing mortgage borrowers. There's miserable news for anyone in the market for a new mortgage. Mortgage rates had been falling across the board, but this week has seen them jump significantly,
according to the source.
Labor Market Tightens as Salaries Surge
A report from the International Recruitment Firm Robert Walters Group highlighted competition for talent is fierce
across sectors, with law firms now offering newly qualified lawyers £150,000 annually—a figure described as “unheard of” by Robert Walters. Robert Walters Group, which operates in areas including the UK, Asia, and Australia, has put up its profit forecast for the year, citing strong demand in key markets.
Robert Walters, chief executive officer at Robert Walters Group, emphasized the shift in labor dynamics. There are shortages in pretty much any country you care to name,
he said. Every job is getting more complicated, and sectors such as law and accounting are also experiencing greater demand.
The firm’s data shows law firms paying newly qualified lawyers £150,000 per year or more, a trend Mr. Walters called “unheard of.”
The report noted that the skills gap is exacerbating labor market tensions. Reskilling and supporting people to move jobs which are in demand needs to be speeded up. Otherwise we may see these clear tensions in the labour market turning into a workforce crisis in many sectors,
a source added. The firm has since raised its profit forecast for the year, citing strong demand in key markets.
What Comes Next for Markets and Workers?
Economists are divided on the trajectory of interest rates. While the Bank of England may delay a hike, energy price volatility and wage pressures could force action later in 2026. Sarah Coles noted that the most generous rates are likely to edge up,
affecting both savers and borrowers.
For workers, the tight labor market offers opportunities but also challenges. Competition for talent is fierce,
one source noted. As companies struggle to fill roles, the focus on reskilling and international recruitment is expected to intensify.
With the UK economy navigating inflation, energy costs, and labor shortages, the coming months will test policymakers and businesses alike. The interplay between monetary policy, wage growth, and global market trends will shape the economic outlook for 2026 and beyond.
BBC News reported on inflation trends, while BBC News covered labor market developments.
