Inflation climbs higher: Experts respond

The UK’s inflation rate has risen for the first time this year, official figures show, external.

Overall prices rose by 2.2% in the year to July, slightly above the Bank of England’s target of 2% where the rate had been since May.

An increase was widely predicted and is largely due to prices of gas and electricity falling by less than they did a year before.

The latest figures mean that prices are now rising faster across the UK than in previous months, but still at a slower pace than in 2022 and 2023 when households were hit especially hard by higher energy and food bills.

Grant Fitzner, chief economist at the Office for National Statistics (ONS), said: “Inflation ticked up a little in July as although domestic energy costs fell, they fell by less than a year ago.

“This was partially offset by hotel costs, which fell in July after strong growth in June.”

Inflation, which measures the rate at which prices rise, surged to 11.1% in the wake of the Ukraine war and pandemic-related supply chain crunches, driving up the cost of living for millions.

But it had been steadily falling until June, as the Bank of England increased interest rates to dampen consumer demand.

The Bank expects inflation to rise further this year before falling back again.

 
Jatin Ondhia, CEO of Shojin, said: “This is a timely reminder, if it were needed, that inflation remains a significant challenge – a challenge to consumers, investors, the Government and the Bank of England.

“The Bank’s interest rates hikes may have steadily brought inflation under control, but there are numerous factors that could drive it back up, and while today’s figure is no reason for panic, it shows how persistent inflationary pressures are likely to be over the coming months. Investors must evaluate accordingly and consider how well-positioned their portfolios are to generate returns in the face of stickier-than-anticipated inflation.

“Diversification and agility will prove key in navigating this testing climate. It should be expected that resilient markets – such as real estate – will continue to attract investor demand, while alternative investments will offer investors the chance to diversify their portfolios if that is indeed their strategy of choice.”
 
Lily Megson, Policy Director at My Pension Expert, said: “A small uptick in inflation certainly isn’t great news after the long journey back to target levels, but it isn’t devastating either. Critically, it should serve as a reminder that we are not yet out of the woods. Until inflation stabilises, things will be challenging for Britain’s retirees and those planning their retirement – particularly following years of their savings facing a walloping from high inflation.

“So, what needs to be done? Frankly, the onus is on our new government to ensure that savers are given the help and support they need to make well-informed financial decisions, even in times of uncertainty. In practice, that looks like enabling access to financial advice, as well as education and guidance on savings and investments.”
 
Andy Mielczarek, CEO of Chetwood Financial, said: “Britons may have thought they’d seen the last of rising inflation for a while, but it has reared its head again. Hiking interest rates has succeeded in bringing us back to the target rate, but experts have been predicting some hiccups on the road to recovery. Well, here we are.

“Today’s news is not necessarily a sign that we are on the wrong path, or that there is cause to panic. Recent wage increases are hopefully helping to soften the blow of higher prices, and the promise of more base rate cuts in the near future should be a source of optimism for mortgage holders.

“Many savers may have mixed feelings about today’s news, but those with the best instincts will be focused on improving their financial health by tracking the best rates for savings products and making the most of the current offering before rates fall any further.”
 

“Services inflation is still too high for comfort”

 
George Lagarias, Chief Economist at Forvis Mazars comments: “Inflation ticking up will probably not discourage the central bank from further rate cuts. Despite the uptick, all key measures, headline, producer prices and services inflation rose less than anticipated by markets.

Inflation edges up, but eases overall

Sam North, Market Analyst at investment platform eToro, said: “The latest UK inflation report revealed a modest uptick in the headline year-on-year rate, which remains above the Bank of England’s 2.0% target, marking a slight rise after two months of stability. Though some may try to spark fear by saying inflation has gone back up again, the overall trend is down and the report did come in lower than expected.

“The largest upward pressure on inflation came from housing and household services, particularly due to a smaller decline in gas and electricity prices compared to last year. However, this was counterbalanced by a significant downward contribution from the hospitality sector, where hotel prices dropped after rising the previous year. Despite the increase, the inflation figures were cooler than expected, leading to a dovish market reaction, with the GBP/USD exchange rate falling slightly.

“This report provides some relief to the BoE members who voted for a rate cut earlier this month, suggesting inflationary pressures might be easing, but the ongoing rise in the headline rate ensures that the debate within the BoE remains finely balanced as they look ahead to their September meeting.”