In July, inflation resumed high in the United Kingdom, driven mainly by rising energy bills for the population. According to the British Bureau of Statistics, the consumer price index (CPI) rose by 2.9 per cent in July, up from 2.6 per cent in June, the highest level since March this year.
The value of the ring increased by 0.3 per cent, which is also higher than the rate of 0.1 per cent for the same period last year. The CPIH, which includes the cost of housing from home, rose to 3.1 per cent as compared to 2.8 per cent as the previous value. This means that after inflation slowed down in June, price pressures in the United Kingdom rose again in July.
Energy price ceilings increased
The British energy regulator, Ofgem, raised the energy price ceiling for residents by 13 per cent between July and September, directly increasing the cost of housing and household services. This adjustment increased the annual energy expenditure ceiling for typical dual-fuel households by Pound221 to Pound1862.
According to the British Bureau of Statistics, the July price ceiling was the first full-fledged period reflecting post-conflict changes in wholesale energy prices in the Middle East. As a result, gas prices increased by 14.7 per cent in July, the largest single-month increase since October 2022 and electricity by 3.6 per cent.
Core inflation remains stable
However, inflation is not fully robust. The core CPI after the removal of energy, food, alcohol and tobacco was equal to 2.6 per cent, indicating that the broader underlying price pressures have not increased simultaneously.
Inflation in services fell from 3.6 per cent to 3.4 per cent. Inflation in food and non-alcoholic beverages slowed from 1.7 per cent to 1.3 per cent, the lowest rate since September 2021. Transport costs also slowed down, with the price of petrol falling by 3.1 pence per litre in July and diesel by 8.8 pence per litre, leading to transport inflation falling from 5.7 per cent to 3.6 per cent.
Interest rate decisions in September are of concern
The consulting body Cornwall Insight expects that the UK energy price ceiling may be raised by a further 4 per cent in October. The Agency believes that the Iranian war, the tight European gas reserves and the strong global demand for liquefied natural gas still support wholesale energy prices.
According to its estimates, the maximum energy price of the resident may rise from Pound1862 to about Pound1941 at a comparable calibre. If this trend continues, inflation in the United Kingdom may continue to rise before and after winter.
The recovery in inflation also complicates interest rate prospects. The British Central Bank maintained the benchmark interest rate at 3.75 per cent in July, but 3 out of 9 policymakers supported an increase to 4 per cent. The British Central Bank now expects CPI inflation to rise to about 3.2 per cent in October and November, with the next interest rate decision scheduled for 17 September.