UK inflation climbs to four-month high as energy bills rise
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Core inflation, which excludes energy, food, alcohol and tobacco, held steady at 2.6 per cent.
PHOTO: REUTERS
- UK inflation rose to 2.9% in July, driven mainly by a 13% increase in the energy price cap, ending a recent period of lower inflation.
- Services inflation dropped slightly to 3.4%, while core inflation remained steady at 2.6%, reflecting domestic economic pressures.
- The ongoing Middle East conflict may push inflation higher, complicating interest rate decisions for the Bank of England and increasing cost of living challenges.
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UK inflation accelerated in July after energy bills surged, ending a short period of respite for hard-pressed British households.
Consumer prices rose 2.9 per cent from a year earlier, up from a 15-month low of 2.6 per cent in June, the Office for National Statistics said on Aug 19.
The increase was in line with the median forecast of economists surveyed by Bloomberg. The Bank of England forecast a pick-up to 2.8 per cent.
The jump largely reflects a 13 per cent rise in the price cap that sets household energy bills. This was only partly offset by cheaper motor fuel.
Services inflation, a gauge of domestic pressures watched by the Bank of England, fell to 3.4 per cent from 3.6 per cent. Core inflation, which excludes energy, food, alcohol and tobacco, held steady at 2.6 per cent.
The pound held gains after the data was released, up 0.1 per cent to US$1.3541, while gilt futures indicated bond yields will open slightly lower.
The spike took overall inflation to its highest since March, and a further pick-up is expected as the impact of the Middle East conflict keeps up the pressure on consumers.
Andy Burnham has made the cost of living the focus of his first month as prime minister, with a range of small measures from capping bus fares to reducing value-added tax on energy bills.
But a prolonged war between the US and Iran will make it harder for the Bank of England to cut interest rates and could increase pressure to raise them. Bloomberg
