Inflation increased to 3.8% last month, surpassing expectations and fueling concerns that the Bank of England may postpone additional interest rate cuts. The annual consumer price index (CPI) rose from 3.6% in June, marking the tenth consecutive month above the central bank’s target of 2%. This surpasses financial market predictions of a 3.7% figure for July and significantly reduces the likelihood of a borrowing cost reduction this year.
In line with projections of decreasing inflation over the next two years, the Bank of England lowered interest rates to 4% earlier this month. However, several Monetary Policy Committee members voted to maintain interest rates until the trend becomes clearer, and July’s CPI jump is expected to further delay future cuts into 2026.
Companies attribute the increase in domestic prices to employment tax rises, uncertainty caused by Donald Trump’s tariff war, and droughts in Spain that have escalated food costs. Additionally, Cornwall Insight, an energy consultancy, anticipates a rise of £17 or 1% in the energy price cap for domestic electricity and gas in October, contributing to higher fuel expenses.
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Source: https://www.theguardian.com/business/2025/aug/20/inflation-rises-july-pause-interest-rate-cuts
