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UK inflation rises by more than expected to 3.8% amid higher food prices UK inflation rises by more than expected to 3.8% amid higher food prices
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Annual July rate all but rules out possibility of a further Bank of England interest rate cut this yearAnnual July rate all but rules out possibility of a further Bank of England interest rate cut this year
Rail fares in England expected to rise by 5.8% next year
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Inflation rose again last month, to a higher than expected 3.8%, amid higher food and fuel prices, adding to fears that the Bank of England will delay further interest rate cuts. UK inflation rose again last month to a higher-than-expected 3.8% amid higher food prices and travel costs, adding to fears that the Bank of England will delay further interest rate cuts.
Figures showed the annual rate as measured by the consumer price index (CPI) climbed from June’s 3.6% reading, sitting above the central bank’s 2% target for the 10th consecutive month. Figures showed the annual rate as measured by the consumer prices index climbed from June’s 3.6% reading, sitting above the central bank’s 2% target for the 10th consecutive month.
That overshot financial market forecasts of a 3.7% figure for July and all but rules out the possibility of a further reduction in the cost of borrowing this year. That overshot financial market forecasts of a 3.7% figure for July and all but rules out another reduction in the cost of borrowing this year, with financial markets not fully pricing in the chance of a fresh quarter-point cut until next spring.
The Bank of England trimmed interest rates to 4% earlier this month in line with projections of falling inflation over the next two years. However, several MPC members voted to hold interest rates until the trend became clearer and July’s jump in CPI is likely to push the timing of future cuts deeper into 2026. The data also suggests rail fares are likely to rise by 5.8% next year. Increases in regulated train ticket prices are usually calculated by adding one percentage point to July’s inflation reading as measured by the retail prices index, which was 4.8%.
Companies have blamed employment tax rises and the uncertainty caused Donald Trump’s tariff war for an increase in domestic prices, while droughts in Spain have pushed up the cost of food. The Office for National Statistics said a jump in air fares was behind much of the increase in average prices. Tickets on flights out of the UK rose 30% month on month, although much of the increase was because of the timing of the summer holiday break.
Cornwall Insight, the energy consultancy, said it expected the energy price cap covering domestic electricity and gas would go up by £17 or 1% in October, adding to domestic fuel costs. Petrol prices nudged prices higher after a comparison with last year, when prices at the pumps were falling.
Food and non-alcoholic beverages were up 4.9% year on year in July, an increase from 4.5% in the 12 months to June.
Droughts in Spain, Italy and Portugal, where the UK sources much of its fresh fruit and vegetables, have pushed up prices this summer at a time when prices would usually fall.
The Bank of England trimmed interest rates to 4% earlier this month in line with projections of falling inflation over the next two years. However, several monetary policy committee members voted to hold interest rates until the trend became clearer, and July’s jump in CPI is likely to push the timing of future cuts deeper into 2026.
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More details soon … Companies have blamed employment tax rises and the uncertainty caused by Donald Trump’s tariff war for an increase in domestic prices, while droughts in Spain have pushed up the cost of food.
Cornwall Insight, the energy consultancy, said on Tuesday that it expected the energy price cap covering domestic electricity and gas would go up by £17 or 1% in October, adding to domestic fuel costs.