UK Inflation Rises to 3.8%, Highest in 18 Months
UK inflation reached 3.8% in July, the highest level in 18 months, driven by:
- Increased transport costs, including airfares and petrol
- Higher electricity bills, soft drinks, and hotel prices
- Food inflation rising sharply, especially non-alcoholic beverages, up nearly 5%
The Bank of England had anticipated this rate. However, services inflation rose to 5.0%, exceeding expectations. Factors contributing to price pressures include:
- Persistent wage growth
- Increased employer costs from higher taxes and minimum wage
Financial markets adjusted, delaying expectations for the BoE’s next rate cut to March 2026. The British pound strengthened slightly, while UK consumer stocks increased. Homebuilders faced pressure due to concerns over prolonged high borrowing costs.