UK inflation has risen as forecast to 2.9% for 12 months to July, driven by higher energy prices, the Office for National Statistics (ONS) has announced.
The rise compares with the rate of 2.6% for the year to June and is largely a result of nergy regulator Ofgem’s 13% increase in the price cap on household gas and electricity bills which came into force on 1 July.
The cap initially sheltered consumers from the surge in energy prices following the outbreak of the Middle East conflict.
Investec economist Ellie Henderson said the cap rise alone will have added 0.5 percentage points to inflation for July.
Last month, the governor of the Bank of England, Andrew Bailey, said a rise in inflation was expected this year because of volatile oil and gas prices caused by continuing conflict in the Middle East.
Inflation eased earlier in the summer during a brief lull in hostilities between the US and Iran.
Despite recent government measures to reduce the cost of living, such as discounted leisure activities this summer and the cut in VAT on electricity bills from October, Deutsche Bank expects UK inflation to peak at around 3% this year, before easing to 2.4% next year.
July’s data will inform the Bank of England’s next move on interest rates at its 17 September meeting, after leaving rates unchanged at 3.75% so far this year.
Markets are currently pricing in a small chance of a rate hike at next month’s gathering of the Monetary Policy Committee, though a single increase to 4% is expected by the end of the year.
… more follows
#Rising #energy #costs #push #rate #inflation #Daily #Business