Increasing energy bills drove inflation to 2.9% in July

Inflation rose to 2.9% in July, its highest level in four months, according to the latest Consumer Price Index published by the Office of National Statistics (ONS).

The latest increase has largely been driven by increased energy costs as a result of the ongoing conflict in Iran and its impact of global oil supplies through the Strait of Hormuz.

Household energy costs rose 13% in July when Ofgem introduced its updated price cap on 1st July, with a further 4% rise in bills expected in October, putting costs at their highest level since 2023. The Bank of England’s latest forecasts, published last month, anticipate inflation could rise to 4.5% by next year should the conflict in the Middle East escalate.

Despite the uptick in overall inflation, some categories of goods have seen a slowdown in the rate of price rises, with food inflation at 1.3%, its lowest level in nearly five years, with the British Retail Consortium arguing that strong competition between supermarkets has helped to keep prices down. Recent hot, dry weather across Europe this summer, however, has raised concerns over poor harvests contributing to higher food prices in the coming months.

The latest uptick in inflation has also been seen in initial data published by other countries, highlighting the international root cause of rising prices. France saw inflation rise from 2% to 2.4% in July, while in Germany, inflation rose from 2.4% to 2.8%.