INFLATION has risen for the first time this year following months of steady decline.
The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation has risen back above the Bank of England’s 2% target to 2.2% in July – up from 2% in June.
It represents the first time inflation has climbed since December, driven partly by a sharp drop in energy bills last July falling out of the annual calculations.
The Bank of England said on August 1 that the fall-away of energy bills in the wider inflation figures would show “more clearly the prevailing persistence of domestic inflationary pressures”.
The latest figures mean that prices are rising faster across the country than in previous months, but still at a slower rate than in 2022 and 2023 when households and businesses were being squeezed during the peak of the cost crisis.
The data comes after the Bank of England’s Monetary Policy Committee voted to cut interest rates to 5% earlier in August, a quarter point reduction.
Officials expect inflation will continue to nudge up for the rest of 2024 before falling gradually again.
The closely watched annual rate of CPI services price inflation – a figure which looks at service-related categories such as education, hospitality and culture – fell to 5.2% in July, down from 5.7% in June, its lowest rate since June 2022.
Experts have warned that persistently high services price inflation could risk pushing the overall inflation data up further, but the drop could provide some encouragement to policymakers.
Luke Bartholomew, deputy chief economist at fund manager Abrdn, said the fall in the rate of services inflation “should help reassure some policymakers that inflation pressures are proving slightly less persistent than feared”.
He added: “After yesterday’s solid labour market report, the Bank will not be in any hurry to cut rates again immediately, but the ongoing slowing in inflation pressure means there is certainly scope for at least one more rate cut this year.”
Meanwhile, the rate of core CPI – a measure which excludes energy, food, alcohol and tobacco from the figures – was 3.3% in the year to July 2024, down from 3.5% in June.
Darren Jones (above), chief secretary to the Treasury, said the figures showed many families are “still struggling with the cost of living”.
Jones said: “The new government is under no illusion as to the scale of the challenge we have inherited, with many families still struggling with the cost of living.
“That is why we are taking the tough decisions now to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.”
The increase in inflation comes after the ONS revealed on Tuesday that wage growth, another key driver of headline inflation, was 5.4% year on year over the three months to June, down from 5.7% in the previous three months.
