By Obinna Uballa
Britain’s inflation rate climbed to its highest level in a year and a half in July, hitting 3.8% from 3.6% in June, official figures showed on Wednesday, keeping the country as the worst performer among the world’s major advanced global economies.
The latest jump, which represents the highest since January 2024, was said to have been driven by higher transport costs, particularly air fares, while services inflation, a key metric for the Bank of England (BoE), quickened to 5% from 4.7% the previous month.
The reading was in line with the BoE’s forecasts, though slightly above the expectations of many economists.
The data, according to experts, underline the BoE’s dilemma. Earlier this month it cut interest rates by a narrow 5-4 vote, but signalled that further reductions would be gradual given what it called stubborn price pressures.
“Today’s inflation figures will reinforce the MPC’s cautious stance on cutting rates,” said Martin Sartorius, principal economist at the Confederation of British Industry. “With second-round effects still a risk, the committee won’t rush to ease policy.”
Reuters reports that Britain’s inflation remains higher than in the United States, where it stood at 2.7% in July, and the euro zone, where it is close to the European Central Bank’s 2% target.
The BoE expects UK inflation to peak at 4% in September, double its 2% target, and not return to that level until mid-2027.
A series of domestic pressures are said to be keeping prices elevated: regulated utility bills surged in April, wage growth remains around 5% despite some slowdown, and employers say higher payroll taxes and a sharp rise in the minimum wage are forcing them to lift prices.
Food and non-alcoholic drink prices were 4.9% higher than a year earlier, the steepest increase since February 2024, further fuelling public concerns about the cost of living.
Recent data also suggest the economy has enough momentum to keep inflation sticky. GDP grew more than expected in the second quarter, and while the labour market is cooling, it is showing signs of stabilisation.
Also, pay settlement data published on Wednesday showed private-sector employers kept basic pay transactions consistent at 3% in the three months to July. This has been the unchanged scenario in the last eighth month running, according to Brightmine.
