Getty ImagesInflation in the UK has risen for the first time this year. official figures show.
Overall, prices rose by 2.2 percent in the period up to July (after 2 percent in June), exceeding the Bank of England’s target.
The increase was widely predicted and is largely due to gas and electricity prices falling less than the previous year.
The latest figures show that prices across the UK are currently rising faster than in previous months, although still at a slower rate than in 2022 and 2023, when households were particularly hard hit by higher energy and food bills.
Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: “Inflation rose slightly in July as household energy costs fell, but the decline was smaller than a year ago.”
“This was partially offset by hotel costs, which declined in July after strong growth in June.”
Inflation, which measures the rate of price increases, rose to 11.1 percent in the wake of the Ukraine war and pandemic-related supply chain bottlenecks, driving up the cost of living for millions of people.
By June, however, the figure had fallen steadily as the Bank of England raised interest rates to dampen consumer demand.
The bank expects inflation to continue to rise this year before falling again.
Mr Fitzner told the BBC’s Today programme that price rises “behind the hood” remained under control, with services inflation falling in July and food prices unchanged.
“This still suggests that inflationary pressures are fairly moderate, at least in the short term,” he said.
According to the Institute for Fiscal Studies think tank, food and beverage prices rose 28.4% between September 2021 and September 2023.
The institute’s latest analysis shows that food bills for poorer households rose far more than those of higher-income households, with the biggest price increases being on cheaper brands.
But in July, food price inflation had settled at just 1.5 percent, according to the ONS.
Meanwhile, price increases in the key services sector – which includes things like hotel stays, gym memberships and car repairs – have begun to ease.
Inflation in the services sector was 5.2% in July, down from 5.7% in June and 7.4% in July 2023, the highest in more than 30 years.
Interest rate decision
The Bank of England is likely to take July’s rise in headline inflation into account in its next interest rate vote in September.
Last month it cut interest rates from 5.25% to 5% – the first cut since the pandemic began – and experts are predicting further cuts this year.
Higher interest rates may benefit savers, but they drive up the cost of variable mortgages and other loans for consumers.
Debapratim De, head of economic research at Deloitte, said the latest official data “is unlikely to materially change the bank’s views on interest rates.”
“We expect interest rates to remain unchanged in September, but two more cuts are likely this year.”
Darren Jones, chief secretary to the UK Treasury, said the new Labour government had “no illusions” about the challenges still facing households.
But Shadow Chancellor Jeremy Hunt said the new figures showed that “more needs to be done to keep inflation low”.
