Burnham's cost of living measures unlikely to combat Iran energy rises

The pound fell below the 1.34 level on the dollar yesterday, we think in large part due to Burnham’s comments on wanting “flexibility” within the fiscal rules, which some investors fear is code for more borrowing.

The surprise pick of John Healey as chancellor has actually gone done rather well.

Healey is seen as a safe pair of hands, and a soft-left figure who is likely to stick to the fiscal rules and act within the parameters of markets - he has also worked on the Treasury before, albeit a few years ago, so he won’t be going into the role completely cold.  It was Healey, however, that resigned from Starmer’s government as recently as last month arguing for greater defence spending and the issuance of war bonds, so it remains to be seen whether he will carry these demands through the doors of Number 11, or whether the constraints of the jobs mean that he will have to put his personal preferences to one side.

Meanwhile, this morning’s UK CPI figures for June were mixed, as while the main inflation rate eased to a below consensus 2.6%, the core rate actually beat estimates - remaining unchanged, also at 2.6%.

While the general trend in the data is encouraging, and should provide some comfort for Bank of England officials, the latest flare up in US-Iran tensions and the spike in oil prices means that it is unlikely to last, regardless of the cost of living measures deployed by the Burnham administration.