When the July figures are released next week, a modest rise in inflation is forecast, but Hargreaves Lansdown said this is not expected to move the Bank of England’s base rate.
Consumer price index inflation has fallen back to exactly the Bank of England’s target of 2% in recent months.
But the investment firm says this seems unlikely to continue as much of the decline so far is due to some big gains in early 2023 disappearing from calculations as 2024 progresses.
A survey of 54 economic forecasters by Bloomberg shows the headline figure could rise to 2.6% by the end of the year before easing back to target levels in 2026.
Hargreaves predicts that July figures could show that inflation is starting to trend higher.
It says that if the July figure comes to 2.3%, investors are unlikely to be too scared.
But if the figure goes much higher than that, investors are likely to scale back their expectations about how far and how quickly the Bank of England will be able to cut its base rate.
Head of personal finance Sarah Coles said: “The expected rise in inflation is unlikely to scare the horses, so it should not yet have an impact on the Bank of England’s rate setters.
“The Bank of England has issued numerous warnings that a rise in inflation is coming.
“It largely comes down to energy prices.
“Every year in July, the energy price ceiling changes.
“It dropped in July, but last July it dropped even further.
“The mathematical impact of replacing a larger trap last year with a smaller trap this
means that inflation will rise – even if prices fall.
“The Bank has already said that it is not concerned about this.
“It is less focused on energy price movements and more interested in secondary effects.
“If core inflation, wage inflation and services inflation are reasonably under control, we can expect another reduction this year.
“Market expectations are reflected in savings and mortgage rates, so they will only change significantly if we get a notable surprise.”