According to data from the Office for National Statistics (ONS), inflation in the UK has risen to 3.8% for July. The figure represents the highest it has been in 19 months. A Reuters poll had anticipated the inflation figure to hit $3.7. Core inflation, which excludes volatile food, alcohol, tobacco, and energy prices, also rose by 3.8%. The higher-than-expected numbers will likely lead to a dip in investor sentiment.
What’s Pushing the UK’s Inflation Figures?
According to ONS chief economist Grant Fitzner, “The main driver was a hefty increase in air fares, the largest July rise since the collection of air fares changed from quarterly to monthly in 2001. This increase was likely due to the timing of this year’s school holidays.“
Food price inflation has also continued to surge in the UK. Items such as coffee, fresh orange juice, meat, and chocolate have seen their most significant rises in recent times. Petrol and diesel prices have also gone up, compared to a dip this time last year.
UK Chancellor Rachel Reeves highlighted that inflation was still much lower than the double-digit figure under the previous government. Reeves stated that there is much to do to stabilize public finances and ease the cost of living.
No Interest Rate Cut In The UK?
The higher-than-expected inflation numbers will likely thwart any chances of an interest rate cut for the UK. According to James Sproule, chief UK economist at Handelsbanken, “The chance of a rate cut in November is vanishingly small.“
Also Read: BlackRock’s Rieder Sees Surprise September Rate Cut as Inflation Holds
Meanwhile, inflation in the US came in lower than what experts predicted for July. A rate cut from the Federal Reserve is highly expected next month. Producer price index (PPI) figures have gone up. The high PPI numbers may cause the Federal Reserve to keep interest rates unchanged.