Energy Price Cap Hike Sends UK Inflation Soaring

UK inflation is expected to surge back up in July due to higher energy prices. The Consumer Prices Index (CPI) inflation rate is forecasted to rise to 2.9% from a 15-month low of 2.6% in June, with the highest rate since March.

The Ofgem's energy price cap hike last month saw the average gas and electricity bill increase by £221 to £1,862 a year, adding 0.5 percentage points to inflation for July. Economist Ellie Henderson stated that 'it was already clear at the publication of the June print that any easing in inflationary pressures as per the headline measure wouldn’t last for long.'

Concerns are also growing about food costs as hot weather damages crops and producers warn of potential shortages, putting upward pressure on food inflation. Victoria Scholar, head of investment at Interactive Investor, forecasts that inflation will continue to rise, peaking above 3% later this year.