UK inflation rose to 3.8% in July, exceeding forecasts and raising doubts about further interest rate cuts this year. The figure, up from 3.6% in June, remains well above the Bank of England’s 2% target for the tenth straight month.
Food prices were a major driver, increasing by 4.9% compared with last year. Products such as beef, orange juice, coffee, and chocolate saw some of the steepest rises. Supply challenges in southern Europe, where much of the UK’s produce is sourced, added to the upward pressure.
Travel also played a key role, with airfares jumping 30% in July due to the peak summer holiday period. Petrol prices contributed further to the inflation climb after a year-on-year comparison showed higher pump costs.
The higher-than-expected figure makes it less likely the Bank of England will lower interest rates again this year. Financial markets now expect the next cut may be delayed until spring, although some analysts argue a November reduction remains possible if price pressures ease.
With rail fares expected to rise next year and unions pressing for higher wages to match living costs, the government faces growing pressure to balance inflation control with household affordability.