UK inflation is expected to climb to 2.9% in July, an increase from June's 15-month low of 2.6%. This anticipated rise is largely attributed to an increase in energy prices, according to economists.
In July, the energy regulator Ofgem raised its price cap, leading to an average annual household gas and electricity bill increase of £221, or 13%, reaching £1,862. Investec economist Ellie Henderson stated that this energy price jump alone is projected to add 0.5 percentage points to the July inflation reading.
While summer heatwaves and the World Cup have provided a boost to the UK economy, economists are expressing concern that this may be short-lived. RSM chief economist Thomas Pugh noted that the inflationary effect of the price cap rise will put "fresh pressure to household budgets and [complicate] the outlook for interest rates."
Earlier this week, UK economic growth slowed to 0.4%, which economists described as an initial warning of a potential slowdown. This is linked to higher prices and borrowing costs that are continuing to emerge from the Iran war.