UK inflation rises for first time this year

The UK’s inflation rate has increased for the first time in 2024, with prices rising by 2.2% in the year to July, according to official figures, Kazinform News Agency correspondent reports.

This slight uptick, moving beyond the Bank of England’s target of 2%, marks a significant shift from the stable rate held since May.

The rise, largely driven by smaller-than-expected drops in gas and electricity prices compared to the previous year, came in slightly below economists' forecasts. Although prices are now climbing faster than in recent months, they still rise at a slower pace than in 2022 and 2023, when households were severely impacted by higher energy and food costs.

The Bank of England anticipates inflation will peak at 2.75% in the coming months before falling below 2% next year. Market analysts are now speculating that the Bank might consider further rate cuts.

Last month, the Bank of England reduced interest rates from 5.25% to 5%, the first cut since the pandemic began. While lower interest rates can benefit savers, they also have the potential to raise mortgage and loan costs for consumers.

Inflation in the services sector, a critical area for the Bank’s decision-making, slowed to 5.2% in July, influenced by volatile factors like airfares and hotel stays. Despite the mixed signals, many experts expect the Bank to maintain current rates in September, with the possibility of two more cuts later in the year.

The inflation surge, which hit 11.1% following the situation in Ukraine and pandemic-related supply chain issues, has been steadily declining, aided by the Bank’s efforts to curb consumer demand through interest rate hikes.

Food and drink prices, which surged by 28.4% between September 2021 and September 2023, have particularly affected lower-income households, though July saw food price inflation drop to just 1.5%, according to the ONS.

Meanwhile, UK property prices have continued to rise, with a 2.7% increase in the year to June. The average house price in England now exceeds £300,000, with significant regional differences across Wales, Scotland, and Northern Ireland.

As the UK navigates these economic shifts, the coming months will be critical in determining the Bank of England's next steps in managing inflation and interest rates.