European Commission President Von der Leyen used her annual State of the Union to signal the EU will accelerate bolstering security and defence capabilities and economic resilience. She said the Commission will recalibrate trade relations, reinforce industrial capacity and broaden external partnerships on energy and critical raw materials to enhance the bloc’s capacity to act.

Catherine Brooks, head of institutional research, said the latest CPI supports a Bank of England hawkish pause, though a material inflation shock could emerge in September. No sign yet of inflation broadening across the economy, but input-price pressure is visible: materials costs +6.1% YoY and factory-gate prices +3.7% YoY, risks that could be passed to already-stretched consumers or compress corporate margins. Core inflation stability is positive, but the BoE has said energy prices now have greater influence on inflation expectations and an elevated energy price cap leaves upside inflation risk. Markets have cut near-term hike odds but still price roughly four hikes through end of next year. Unless the Iran war ends or Middle East supply constraints ease, Brooks warned the UK faces prolonged upward pressure on rates.

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