Energy Price Cap Rise Drives UK Inflation Forecast Upward

The UK's inflation rate is expected to rise in July due to higher domestic energy bills. Economists predict that the Consumer Prices Index will come in at 2.9%, up from 2.6% in June.

The increase is likely to be driven by a 13% jump in Ofgem's energy price cap, which reset on 1 July. According to Investec economist Ellie Henderson, the cap rise alone will add 0.5 percentage points to inflation for July.

Despite recent government measures to reduce the cost of living, such as discounted leisure activities and a cut in VAT on electricity bills from October, Deutsche Bank expects UK inflation to peak at around 3% this year before easing to 2.4% next year.