According to new figures from the Office for National Statistics (ONS), inflation has exceeded the Bank of England’s 2% target. The Consumer Prices Index (CPI) showed a 2.2% increase in annualized inflation for July, surpassing the 2% reported in June but falling short of the 2.3% forecast. The most significant increase in prices came from housing and household services, driven by smaller declines in gas and electricity prices compared to last year. Conversely, the largest decrease in prices was observed in restaurants and hotels, where hotel prices fell this year after rising last year.
Core inflation, which excludes volatile factors such as energy, food, alcohol, and tobacco, rose by 3.3% in the 12 months leading to July 2024, down from 3.5% in June. Within the services sector, inflation dropped from 5.7% to 5.2%.
Martin Sartorius, Principal Economist at CBI, stated, “Inflation undershooting the Bank of England’s expectations is a positive indicator that price pressures are normalizing for households and businesses. Today’s data suggests that the Bank’s Monetary Policy Committee can have confidence that domestic price pressures are less likely to disrupt a sustainable return to the 2% target. While a second consecutive interest rate cut next month is not guaranteed, the MPC will remain cautious of potential inflation risks, particularly as wage growth remains high.”
