Britain's annual inflation rate accelerated in July on the back of the sharpest jump in gas prices in nearly four years, according to data from the Office for National Statistics released Wednesday.
Consumer price growth was at 2.9% year over year in the month, up from June's 2.6%. The latest figure aligned with the consensus forecast for the month.
"Inflation rose in July, driven by a sharp increase in gas prices following this month's change to the energy price cap. This was the largest rise in gas prices for almost four years," ONS Deputy Director for Prices Mike Hardie said. "Other upward pressures included furniture prices falling by less than usual for this time of year, and also a smaller fall for clothing prices due to reduced discounting."
July 2026 inflation received its sharpest boost from gas prices since the Ukraine war-driven energy crisis in October 2022, as gas costs jumped 14.7% after falling 7.2% a year earlier.
Excluding energy, food, alcohol and tobacco, the annual inflation rate remained at 2.6%, above the market forecast of 2.5%
Against this backdrop, ING expects the Bank of England to maintain its key rate at 3.75% for the remainder of the year before restarting rate cuts in the spring of 2027.
"We currently expect headline inflation to peak around 3.2% into next winter, on the assumption that food inflation does start to pick up a bit. But that's well below the 4% level, which we think is the threshold for the Bank to seriously consider rate hikes," ING wrote.
