Britain’s annual inflation rate rose in July for the first time this year, surpassing the Bank of England’s target, according to official data released on Wednesday. The Consumer Prices Index (CPI) increased by 2.2 percent in the 12 months to July, up from a 2.0 percent annual gain in June, as reported by the Office for National Statistics (ONS).
The ONS attributed the rise primarily to gas and electricity prices, which fell by less than they did a year ago.
This faster pace of inflation could hinder the Bank of England’s ability to cut interest rates swiftly, analysts suggest. Earlier this month, the BoE lowered borrowing costs for the first time since the onset of the Covid pandemic, following a decline in UK inflation from four-decade highs back toward its 2-percent target.
However, Wednesday’s data “may not alleviate the Bank’s concerns about persistent price pressures entirely,” said Ruth Gregory, deputy chief UK economist at research group Capital Economics. She added that the figures likely aren’t enough to prompt a consecutive interest rate cut in September.
Despite this, Gregory expects the BoE to reduce rates again later this year, potentially lowering its main interest rate to 4.5 percent from the current 5.0 percent.
