Energy Price Hike Sets Stage for Higher Inflation in July

Rising energy prices are likely to push inflation higher in July, according to economists.

The Consumer Prices Index (CPI) is expected to rise to 2.9% from 2.6% in June, driven by a 13% jump in the Ofgem energy price cap, which reset on 1 July.

Investec economist Ellie Henderson said the energy price cap rise alone will add 0.5 percentage points to inflation for July.

Despite 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.