UK inflation rose to 2.9% in the year to July. This represents the highest rate in four months, primarily driven by a surge in household energy costs. The Office for National Statistics reported that gas prices saw their sharpest increase in nearly four years, largely due to supply constraints following the conflict between the US, Israel, and Iran.
Ofgem increased the energy price cap on 1 July by 13%. This move added £221 to the typical annual household bill. Independent analysts at Cornwall Insight predict a further 4% rise in costs by October, which would reach levels not seen since July 2023.
While energy costs put upward pressure on the economy, other sectors show different trends. Food inflation slowed to 1.3%, marking its lowest rate in five years. Prices for items like pasta, olive oil, and fresh fruit declined as supermarkets competed for market share.
Economists do not anticipate these figures will force the Bank of England to adjust interest rates during the September meeting. Projections suggest inflation may peak at 3.5% in the coming months before moving back toward the 2% target by the end of next year, assuming energy prices remain stable.
Chancellor John Healey cited the impact of the conflict in the Middle East on domestic prices. Meanwhile, organizations like Second Chance Medway report that the cost of living remains a challenge for both those on benefits and working families across the country.