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UK inflation rises to 2.9% as energy bills drive cost of living pressure
Energy prices climbed after an Ofgem quarterly price cap took effect, lifting inflation from 2.6% in June, and another cap increase is expected in October.
UK inflation accelerated to 2.9% in July, driven mainly by higher energy bills after an Ofgem quarterly price cap increase came into force, according to analysis by the Guardian Economics editor Heather Stewart. The move followed a June inflation rate of 2.6%, with cheaper fuel partially offsetting the energy impact earlier. That fuel relief faded as hopes for a permanent end to conflict in the Middle East weakened, and the report says another Ofgem increase for household energy bills is expected in October.
Prime Minister Andy Burnham has already cut VAT on electricity bills to ease pressure on household budgets. The analysis says the measure could help, but that it risks being overwhelmed by broader price rises heading into the autumn. Food prices have so far remained relatively calm, rising 1.3% year on year in July, down from 1.7% the month before. The report also warns that extreme heat and drought may push food costs higher, citing the Food and Drink Federation chief economist Liliana Danila, who said supply chain disruption and extreme weather are likely to keep pressure on prices of key ingredients.
The Guardian Economics analysis adds that there was little in the latest inflation data to concern the Bank of England yet, as policymakers weigh whether they need to raise interest rates next month. It also notes that core inflation, excluding volatile fuel and food, was unchanged at 2.6%.