Energy Price Cap Hike Sparks Fears of Surging Inflation

UK inflation is expected to surge in July due to rising energy prices, according to economists. The Consumer Prices Index (CPI) inflation rate is forecasted to rise to 2.9% from a 15-month low of 2.6% in June.

The Ofgem energy price cap was increased by 13%, leading to an average gas and electricity bill increase of £221 to £1,862 per year. Economists believe the energy price cap rise alone will add 0.5 percentage points to inflation for July.

Investec economist Ellie Henderson said '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, with the July increase to the Ofgem energy price cap likely to erase any progress towards the Bank of England’s 2% target.'