UK inflation has increased, with the consumer price index (CPI) reaching 2.9% in the 12 months to July, according to official data from the Office for National Statistics (ONS). This marks an increase from the previous inflation reading of 2.6%.
The ONS stated that the rise follows the reset of the energy price cap and is likely the start of a period of increasing price growth. Mike Hardie, deputy director for prices at the ONS, noted that upward pressures included furniture and clothing prices falling less than usual for this time of year due to reduced discounting.
Conversely, the prices of raw materials and goods leaving factories slowed again, driven by a drop in crude oil and refined petroleum. Services inflation, which Bank of England policymakers monitor for wage pressure signals, eased to 3.4%, and core inflation, which excludes food and energy, stood at 2.6%.
City economists widely anticipate inflation to peak later this year or in early 2027, at a minimum of around three per cent. This delay is attributed to the gradual impact of volatile energy prices on UK households.
On Tuesday, UK borrowing costs, measured by 10-year gilt yields, reached a near-two decade high. The government sold medium-term bonds with a yield of 5.155%, the highest interest rate for such debt since 2007. The Bank of England has previously warned of potential interest rate increases if disruptions in oil and gas trade flows continue.