Britain’s annual inflation rate increased in July, surpassing the Bank of England’s target for the first time this year, according to official data released on Wednesday. The Consumer Prices Index (CPI) rose by 2.2% over the 12 months to July, up from a 2.0% annual gain in June, as reported by the Office for National Statistics (ONS).
The ONS attributed the inflationary rise to the slower decline in gas and electricity prices compared to the previous year. This uptick in inflation could impact the Bank of England’s approach to adjusting interest rates.
Earlier this month, the Bank of England had reduced borrowing costs for the first time since the start of the Covid pandemic, as inflation eased from its highest levels in four decades towards the 2% target. However, Wednesday’s data may dampen expectations for a rapid rate cut.
Ruth Gregory, deputy chief UK economist at Capital Economics, suggested that the current inflationary pressures might prevent the Bank from making consecutive interest rate cuts in September. Nevertheless, she anticipates a further reduction in the Bank’s main interest rate later this year, potentially lowering it from 5.0% to 4.5%.
