The United Kingdom’s annual inflation rate increased to 2.2% in July, surpassing the Bank of England’s target for the first time this year. This new figure was revealed by official data released on Wednesday.
The Consumer Prices Index (CPI), which measures inflation, showed a rise of 2.2% for the 12 months ending in July. This is up from a 2.0% increase recorded in June. According to the Office for National Statistics (ONS), this uptick was primarily due to the slower decline in gas and electricity prices compared to a year earlier.
The rise in inflation could influence the Bank of England’s decisions regarding interest rates. Analysts suggest that the increased inflation might delay any further reductions in interest rates.
Earlier this month, the Bank of England had cut borrowing costs for the first time since the Covid pandemic began, aiming to manage the inflation which had surged to levels not seen in decades.
Ruth Gregory, deputy chief UK economist at Capital Economics, noted that Wednesday’s data might not fully ease the Bank’s worries about ongoing price pressures.
“And it probably isn’t enough to prompt a back-to-back interest rate cut in September,” she said. However, she anticipates that the Bank of England will likely reduce rates again later this year, bringing them down to 4.5% from the current 5.0%.
