Inflation has risen to 2.2% in July, up 0.2% from the previous month, the Office for National Statistics (ONS) reveals.
The largest upward contribution to the monthly change came from housing and household services where prices of gas and electricity fell by less than they did last year.
Meanwhile, the largest downward contribution came from restaurants and hotels, where prices of hotels fell this year having risen last year.
At the start of the month, the Bank of England (BoE) cut the interest rate to 5% from 5.25%.
This was the first BoE interest rate cut since August last year. Before August last year, the BoE made 14 consecutive rate increases.
During the latest Monetary Policy Committee (MPC) meeting, it was noted that they expect inflation to increase to around 2.75% in the second half of this year.
Last week, Hargreaves Lansdown predicted there would be a modest increase in July’s inflation figures.
The investment firm said the 2% was unlikely to last, because much of the fall so far has been due to some big increases in early 2023 dropping out of the calculations as 2024 draws on.
Meanwhile, BoE MPC member Catherine Mann said on Monday that the UK must not be “seduced” into thinking that inflation has been contained.
Mann argued that despite recent falls in general prices, the underlying price pressures in the economy remain strong.
Commenting on the latest inflation figures, Mortgage Advice Bureau deputy chief executive officer Ben Thompson says: “It’s been a good August for those with mortgages and, indeed, first time buyers. A slight uptick in inflation in July therefore shouldn’t dampen spirits too much, and to some degree was expected.”
“However, it’s important to note that inflation holding steady (or indeed falling back down to 2%) in the next few months will be vital to encourage more interest rate cuts from the BoE. That path however is also currently expected too.”
“For now, lenders would have already factored in the last rate reduction and will be basing current fixed rates on future interest rate expectations, so we wouldn’t expect this to have a big impact on the rates currently being offered.”
Propertymark chief executive officer Nathan Emerson adds: “The pathway to a strong and stable economy does come with ups and downs along the way, so today’s fluctuation, while disappointing, is an unfortunate but accepted part of the process. Households remain in a stronger position than only 12 months previous, but there is potential the BoE may reflect on today’s figures very carefully when the MPC next meet to decide on interest rates.”
“While Propertymark is keen to see a further lowering of interest rates, it’s essential to bear in mind this process must be carefully considered to keep the economy firmly on track.”
Lawson Financial director Michelle Lawson states: “Although inflation as a whole has crept up, the key pointers show overall things are cooling. This will be music to everyone’s ears. Let’s hope the BoE’s ears are listening as this could very well indicate an additional September rate cut if the next CPI data is on the same path. The tables appear to be turning. Anyone looking to buy property should consider doing so sooner rather than later.”
