Inflation climbs above Bank of England target to 2.2%

Inflation has risen back above the Bank of England’s 2% target, in the first increase of 2024 after months of steady declines.

The Office for National Statistics (ONS) said Consumer Prices Index (CPI) inflation rose to 2.2% in July, up from 2% in June.

It represents the first time inflation has climbed since December, driven partly by a sharp drop in energy bills last July falling out of the annual calculations.

The Bank of England said on August 1 that the fall-away of energy bills in the wider inflation figures would show “more clearly the prevailing persistence of domestic inflationary pressures”.

The latest figures mean that prices are rising faster across the country than in previous months, but still at a slower rate than in 2022 and 2023 when households and businesses were being squeezed during the peak of the cost crisis.

The data comes after the Bank of England’s Monetary Policy Committee voted to cut interest rates to 5% earlier in August, a quarter point reduction.

However, the latest rise in inflation is likely to set the tone for the MPC’s policy at its next decision in September, where most economists predict they will hold rates and wait until November before cutting borrowing costs again.

Officials expect inflation will continue to nudge up for the rest of 2024 before falling gradually again.

The closely-watched annual rate of CPI services price inflation fell to 5.2% in July, down from 5.7% in June, its lowest rate since June 2022.

Experts have warned that persistently high services price inflation could risk pushing the overall inflation data up further, but the drop could provide some encouragement to policymakers.

Darren Jones, Chief Secretary to the Treasury, said the figures showed many families are “still struggling with the cost of living”.