While a post-pandemic burst of inflation has abated across much of the developed world, the UK is still stuck with the highest price growth among big Western economies.

UK inflation rose to 3.8 per cent in July, up from 3.6 per cent in June, keeping the rate stuck at its highest level since January. The rise in Consumer Prices Index (CPI) was also higher than economists had anticipated, who had forecasted 3.7 per cent.

UK inflation climbed for a second month in July, adding pressure on the Bank of England to reconsider its pace of interest-rate cuts.

The Bank of England currently expects inflation to hit 4% in September, the all-important month for pensioners. Wage growth is currently slightly higher than this at 4.6% (including bonuses), although it could shift slightly in next month's report.

The U.K.’s annual inflation rate was higher than expected at 3.8% in July, according to data released by the Office for National Statistics (ONS) on Wednesday. Most economists had anticipated inflation would reach 3.

By contrast, Eurozone inflation held steady in the same month at 2 per cent, according to separate data from Eurostat, the EU’s statistics agency, with a reading of just 0.9 per cent in France. The 1.8 percentage point gap between UK and euro area inflation is the widest since September 2023.

Higher food and airfare prices pushed U.K. inflation above expectations in July. The development has tempered market expectations that the Bank of England will cut interest rates again this year.

Transport was the biggest factor driving up overall inflation in July, particularly due to a spike in flight prices as families booked summer holidays. | ITV National News

The U.K.'s annual inflation rate hit a hotter-than-expected 3.8%in July, according to data released by the Office for National Statistics (ONS) on Wednesday.