Financial News: U.K. Inflation Rises On Household Energy Bills

U.K. Inflation Rises On Household Energy Bills

(RTTNews) - U.K. consumer price inflation accelerated in July as the Middle East crisis stoked household energy prices, official data showed Wednesday.

The consumer price index posted an annual growth of 2.9 percent in July, faster than the 2.6 percent rise in June, the Office for National Statistics said. This was the highest in four months and matched economists' expectations.

On a monthly basis, consumer prices moved up 0.3 percent, following a 0.1 percent gain. Monthly inflation also came in line with expectations.

Core inflation, which excludes prices of energy, food, alcohol and tobacco, remained unchanged at 2.6 percent in July.

The CPI goods annual rate rose to 2.2 percent from 1.7 percent, while services inflation eased to 3.4 percent from 3.6 percent.

Housing and household services costs grew at a faster pace of 4.1 percent in July due to the rise in energy bills after the energy regulator Ofgem hiked the price cap. ING economist James Smith said inflation is likely to peak around 3.2 percent next winter. The economist assumed that the expected 3.2 percent is well below the 4 percent level, which is likely to be the threshold for the Bank of England to seriously consider rate hikes.

Smith expects the BoE to keep rates on hold this year, before resuming rate cuts next spring.

Last month, the central bank maintained its benchmark rate at 3.75 percent, the lowest since June 2023. The bank had reduced the rate by 25 basis points each in August and November last year.

As the rise in inflation is broadly in line with the BoE's expectations, the Monetary Policy Committee remains on track to keep rates on hold at its next meeting, Confederation of British Industry economist Martin Sartorius said.

Sartorius added that the outlook for energy prices remains volatile and uncertain, but the loose labor market, soft underlying activity, and tighter financial conditions should continue to limit the extent to which the Iran conflict feeds through to domestic price pressures.

Separate data from the ONS showed that factory gate inflation softened to 3.1 percent in July from 3.5 percent in June. Likewise, input price inflation eased sharply to 4.9 percent from 7.4 percent in the previous month. Further, data showed that monthly output prices rose 0.2 percent in July, up from a revised fall of 0.1 percent in June. At the same time, input prices fell 1.7 percent compared to a 1.9 percent decline in the prior month.

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