Inflation Rises To 2.2%

The Consumer Price Index (CPI), which measures the cost of living, increased by 2.2% in the 12 months leading up to July 2024. This marks the first rise in inflation since December, and it slightly surpasses the Bank of England's target of 2%.

The underlying figures are encouraging:

-CPI (YoY): 2.2% vs. 2.3% exp. (prior 2.0%) 

-CPI (MoM): -0.2% vs. -0.1% exp. (prior 0.1%) 

-Core CPI (YoY): 3.3% vs. 3.4% exp. (prior 3.5%) 

-CPI Services (YoY): 5.2% vs. 5.5% exp. (prior 5.7%)

Key Factors

1. Energy Costs: The recent increase is largely attributed to gas and electricity prices, which fell by less than they did a year ago. As energy costs play a significant role in household budgets, this trend has contributed to the overall inflation rate.
2. Hotel Costs: Interestingly, hotel costs fell in July after strong growth in June, partially offsetting the impact of rising energy prices.
3. Historical Context: While prices are now rising faster across the UK compared to previous months, the current pace remains slower than during the challenging years of 2022 and 2023 when households faced higher energy and food bills.

The Road Ahead

The Bank of England anticipates further inflation increases this year before a subsequent decline. Keep an eye out for additional inflation figures, as well as employment and wages data, which will be released before the next rate-setting meeting in September.

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