STORY
UK inflation rose to 2.9% in July, up from 2.6% in June, according to figures from the Office for National Statistics. The increase marked the first rise in the annual Consumer Prices Index rate since March and was driven in large part by higher household energy costs following the July increase in Ofgem’s energy price cap.
The Resolution Foundation said the rise was larger than the 2.8% increase expected by the Bank of England and estimated that higher energy bills added around 0.4 percentage points to the headline inflation rate. Petrol prices fell by 3.1 pence per litre during July, partially offsetting the increase in household energy costs, while food prices were unchanged over the month. Services inflation also eased from 3.6% in June to 3.4% in July.
The think tank said inflation could rise further during the autumn and peak at around 3.2% towards the end of the year if current energy market conditions persist. It argued that the Government should be prepared to introduce targeted support for households if energy bills rise further, while warning that the renewed increase in inflation could also affect mortgage borrowers hoping for lower interest rates and add to pressure on the public finances ahead of the autumn Budget.