The UK saw inflation rise to 3.8% in July, marking the highest rate since January 2024. This increase continues to challenge the UK’s economy and highlights ongoing price pressures across the country.
Official data released on Wednesday shows inflation up from 3.6% in June. The services sector inflation also rose, reaching 5% in July compared to 4.7% in June. This sector is important as it reflects much of the UK’s economic activity.
Economists had expected UK inflation to be around 3.7%, with service prices increasing by 4.8%. However, the actual figures were slightly higher than predicted. After the announcement, the British pound saw a small rise.
The Bank of England (BoE) recently cut interest rates, but the decision was made with caution. The Monetary Policy Committee voted narrowly, signaling that future rate cuts might slow due to persistent inflation risks in the UK.
Martin Sartorius, an economist at the Confederation of British Industry, said the inflation data supports the BoE’s careful approach to changing interest rates soon.
Compared to other major economies, the UK’s inflation rate remains high. The United States reported inflation at 2.7% in July, while the eurozone expects inflation to stay near its 2% target.
The BoE forecasts that UK inflation could reach 4% in September and stay above 2% until mid-2027. Factors influencing this include rising energy prices, a tight UK labor market, wage growth, and recent tax and minimum wage hikes.
Transportation costs, particularly airfares, were the main drivers behind the inflation increase in July. Food and drink prices also rose significantly, by 4.9%, the highest since February 2024.
Overall, recent data shows that the UK economy is maintaining enough momentum to keep inflation levels elevated for now.
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