Inflation Climbs to 2.9% as Energy Bills Jump
Inflation rose to 2.9 per cent in the year to July, up from 2.6 per cent and its highest since March, official figures showed. The increase was driven almost entirely by the 13 per cent rise in the energy price cap on 1 July, which added £221 to the typical annual bill. Food inflation eased to 1.3 per cent and petrol prices fell, but the figures complicate the Bank of England’s path to further interest-rate cuts.
The jump is uncomfortable but largely mechanical, the direct result of a single step-change in energy bills rather than broad-based price pressure, and services inflation actually eased. That distinction matters to the Bank of England, which cut Bank Rate to 3.75 per cent last month and must now judge whether the rise is a one-off bump or the start of something stickier. For households the relief in food and fuel is real but is being swamped by heating and power costs. The Chancellor, John Healey, pinned part of the pressure on the Iran war’s effect on energy prices. Watch the Bank’s next decision and whether inflation falls back as the cap’s effect washes through.