UK Inflation Rises for UK Inflation Rises, Exceeding Bank’s Target

by Priviledge Zviregei

The UK’s inflation rate rose to 2.2% in July, marking the first increase this year and exceeding the Bank of England’s target of 2%. While a rise was expected, it was less than many economists predicted. 

The increase is attributed to a slower decline in gas and electricity prices compared to the previous year. Despite the rise, inflation remains significantly lower than in 2022 and 2023 when households faced particularly high energy and food bills.

The Bank of England anticipates inflation to reach 2.75% in the coming months before falling below 2% next year.  The Bank recently cut interest rates to 5% from 5.25%, the first reduction since the pandemic. While this could benefit savers, it may increase the cost of mortgages and loans for consumers. 

Experts are predicting further interest rate cuts this year, with some even suggesting multiple cuts. However, some economists remain cautious, citing persistent price pressures in the services sector. 

Despite the recent rise in inflation, food price inflation has settled down to 1.5% in July, according to the ONS. 

The news comes alongside data showing a rise in house prices, although this data predates the August interest rate cut.  The prospect of further interest rate cuts could lead to increased activity in the housing market.