Financial News: UK Inflation Hits 18-Month High

UK Inflation Hits 18-Month High

08/20/2025 - 04:47:00 (RTTNews)

(RTTNews) - UK consumer price inflation accelerated to an 18-month high in July on airfares and food prices, suggesting that the Bank of England is likely to delay further easing.

The consumer price index posted an annual growth of 3.8 percent after rising 3.6 percent in June, the Office for National Statistics reported Wednesday.

Inflation continued to remain stubbornly above the 2 percent target and hit the highest since January 2024, when the rate was 4 percent. Prices were forecast to climb 3.7 percent in July.

Core inflation that excludes prices of energy, food, alcohol and tobacco, rose to 3.8 percent from 3.7 percent in June.

The largest upward contribution to inflation came from transport, particularly air fares. This was partially offset by a large downward contribution from housing and household services.

Food and non-alcoholic beverages prices were up 4.9 percent and transport cost moved up 3.2 percent due to the surge in airfares.

Annual growth in goods prices increased to 2.7 percent from 2.4 percent. Likewise, services inflation rose to 5 percent from 4.7 percent.

On a monthly basis, consumer prices rose only 0.1 percent, following June's 0.3 percent gain. At the August monetary policy meeting, the <a href=https://www.rttnews.com/3563650/bank-of-england-cuts-rate-in-tight-vote.aspx?refresh=1 target=_blank >BoE had reduced its benchmark interest rate</a> in a close call as members became more concerned about persistent inflation. The current 4.00 percent interest rate is the lowest since early 2023.

The bank projected inflation to peak at 4.0 percent in September but to fall back thereafter towards the 2 percent target.

British Chambers of Commerce Research Manager Stuart Morrison said there are little sign that inflation will be near the BoE's 2 percent target anytime soon. As inflation was driven primarily by airfares, the BoE won't be too concerned, ING economist James Smith said. The economist expects a cut in November to be followed by two further moves next year.

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