Inflation in the United Kingdom rose to 2.9% due to rising energy prices
Annual inflation in the United Kingdom rose to 2.9% in July, up from 2.6% in June. The main factor was higher energy bills following the implementation of a new quarterly price cap by the British energy regulator Ofgem, according to The Guardian World.
The rise was partially offset by lower fuel prices. According to the publication, this was a result of the de-escalation of hostilities in the Middle East after Donald Trump announced a memorandum of understanding with Iran in June. At the same time, fuel prices have been rising again in recent weeks as hopes for a definitive end to the conflict have faded.
Ofgem’s price cap on household energy bills in the UK is expected to rise by 4% in October. Prime Minister Andy Burnham had previously decided to reduce the VAT on electricity bills to ease the strain on family budgets. However, broader price increases could offset the effect of this measure.
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Food prices rose more slowly in July—by 1.3% year-over-year, down from 1.7% in June. Liliana Danila, chief economist at the Food and Beverage Federation, stated that supply chain disruptions, geopolitical instability, heat, and drought will continue to put pressure on the cost of key ingredients.
Core inflation, which excludes fuel and food prices, remained at 2.6%. Labor market data also showed a slowdown in wage growth. At the same time, the yield on 10-year UK government bonds reached 5.05%, which, if this trend continues, could increase budget expenditures on debt service.
Paul Novak, General Secretary of the Trades Union Congress, called on the government to increase support for households. The organization proposes funding an energy assistance package through a tax on the excess profits of British banks.
