Higher energy bills drove UK inflation up to 2.9% in the 12 months to July, the latest figures show.
Gas prices rose at the highest rate in almost four years, the Office for National Statistics (ONS) said, which led to an increase to the energy price cap in July. Energy prices surged after US-Iran war began in February, which has restricted global oil supplies.
It is the highest rate of inflation since March, but some price rises have slowed: food inflation, at 1.3%, is at its lowest rate for close to five years.
Experts say Wednesday’s inflation figure is unlikely to influence the Bank of England to change its key interest rate at its next meeting in September.
Energy costs rose on 1 July after regulator Ofgem increased the price cap on household gas and electricity bills by 13%, which added £221 a year to the typical household’s bill.
Energy bills are forecast to rise by 4% from October, according to Cornwall Insight, which could see bills rise to their highest level since July 2023.
The independent energy consultancy increases are being driven by ongoing uncertainty over the US-Iran conflict, which has seen effective closures of the Strait of Hormuz, a key trading passage for oil-carrying ships.
Cornwall Insight added that energy price pressures were being compounded by the ongoing heatwave across Europe, “increasing gas demand for power generation to meeting air conditioning and cooling demand”.
ONS prices director Mike Hardie said furniture prices, which fell by less than usual for that time of year, added to the upward pressure on inflation. He said clothing was also not being discounted as much.
Chancellor John Healey said the Iran war was continuing to affect prices in the UK, but insisted Britain’s economy was resilient.
“We have cut VAT on electricity bills and capped bus fares at £2 – to give breathing space to those feeling the strain,” he said.
“There is more to do to restore hope and build a stronger economy where prosperity is shared more fairly across Britain.”
Shadow chancellor Mel Stride said the country was unprepared for global shocks due to Labour’s “mismanagement”, leaving ordinary people “paying the price”.
Penny Keevil says the cost of living crisis is here to stay. She founded crisis support centre Second Chance Medway, which runs a discounted food pantry two days a week, where she now sees not only people on benefits, but working people too.
“The need for affordable food now reaches across every part of the community,” she said.
“Energy bills are still far too high and wages and incomes aren’t keeping up”.
