Inflation in the UK – live: First rise to 2.2% this year means setback for interest rate cut next month

Luke Bartholomew, deputy chief economist at fund manager Abrdn, said the decline in services inflation “should help reassure some policymakers that inflationary pressures are proving somewhat less persistent than feared.”

“After yesterday’s solid jobs report, the bank will be in no rush to cut rates again immediately, but continued easing inflation pressures mean there is plenty of scope for at least one more rate cut this year.”

Martin Sartorius, chief economist at the Confederation of British Industry, added: “Inflation below the Bank of England’s expectations is seen as a positive sign that price pressures for households and businesses are continuing to normalise.”

“Today’s data will give the Bank’s Monetary Policy Committee some confidence that domestic price pressures are less likely to threaten a sustained return to the 2 percent target.

“However, a second consecutive interest rate cut next month is not certain.

“This is because the MPC will continue to monitor upside risks to the inflation outlook, particularly as wage growth remains stubbornly high.”

Commenting on today’s inflation data, which shows a slight increase in consumer price inflation to 2.2 percent, TUC General Secretary Paul Nowak said:

“The Conservatives have failed to protect families from rising prices, soaring interest rates and a crisis in living standards. But with a new approach, the government can keep inflation low, keep interest rates falling and keep wages rising.

“Inflation has been caused by problems such as high energy prices, not wages. The Bank of England should continue to ease pressure on families and businesses by cutting interest rates.”

“The government’s plan to strengthen workers’ rights can be a game-changer, boost productivity and make work pay. And if we invest in industry, including energy security through our own national supply, we can better control future inflation.”

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.”

Suren Thiru, Economic Director of IBritish auditor and director of the Institute of Chartered Accountants in England and Wales said: “These figures suggest that the optimal timing for inflation in the UK has passed, as recent downward pressure on base rates due to lower energy costs eased in July.

“This increase signals the start of a period of moderately rising price pressures. Stronger demand due to a recovering economy and higher energy bills are likely to keep inflation above the Bank of England’s two percent target until next year.

“The significant slowdown in services inflation suggests that underlying price pressures are becoming less of a problem. Increasing pressure on wages due to a subdued labor market should help keep inflation on a clear downward trend.

“These figures mean that a rate cut in September is unlikely and will likely lead to a final, possibly unanimous, vote among rate-setters in favor of keeping rates on hold.”

Shadow Chancellor Jeremy Hunt said: “Today’s figures show how important it is that the new Labour government follows the path of the previous Conservative government and focuses on keeping inflation low.

“In government, we have taken the difficult decisions to reduce inflation from 11.1 percent to the Bank of England’s target of 2.0 percent – paving the way for the first interest rate cut in four years. But there is clearly more to do to keep inflation low.”

Simon French, chief economist at Penmure Liberum, called the inflation data encouraging and said the Bank of England would likely cut interest rates again at the end of the year.

Most economists believe the bank is unlikely to cut rates again in September, but it could make further rate cuts before the end of the year.

Darren Jones, Chief Secretary to the Treasury, said: “The new Government has no illusions about the scale of the challenges that lie ahead. Many families are still struggling with the cost of living.

“That is why we are now taking the difficult decisions to restore the foundations of our economy so that we can rebuild Britain and help all parts of the country live better.”

The National Statistics Office said the largest upward contribution to the monthly change in inflation rates came from the housing and household services sector, where gas and electricity prices fell less than last year.

The largest downward contributors came from restaurants and hotels, whose hotel prices fell this year after rising last year.

According to new data, inflation has risen for the first time in 2024 – to 2.2 percent, highlighting the Bank of England’s struggle to control prices.

Official figures show that inflation rose again above the Bank of England’s two percent target in July, partly due to holiday-related price increases on flights and hotels.

Every month, the Office for National Statistics (ONS) publishes inflation figures from the Consumer Price Index (CPI), which measures the rate of price increases year-on-year.