UK inflation reached 2.9% in July, according to the Office for National Statistics, marking an increase from 2.6% in June. This rise is attributed to the impact of the Iran war on energy prices, leading to a renewed cost of living squeeze for British households.
British consumers experienced the sharpest summer increase in energy charges in four years during July. This follows the US-Israel war on Iran, which sent shock waves through global energy markets. City economists had forecast this increase in the consumer prices index measure of inflation to 2.9%.
The Bank of England is considering whether to raise interest rates as early as next month due to concerns about persistently high inflation. However, a slowdown in the jobs market, including a decrease in job vacancies and a slump in private sector pay growth, could deter the central bank from taking action.
The government has announced measures to ease the cost of living, including cutting VAT to reduce consumer electricity bills by an average of £45 a year from October. The Bank of England expects this policy, along with a £2 cap on bus fares in England, to lower the headline inflation rate by 0.1 percentage points.