UK Inflation Hits 2.9% Amid Rising Energy Bills

The UK's inflation rate has risen to 2.9% in July, driven mainly by rising energy bills. This increase is likely to be the first of several, making it a challenge for the government to shield consumers from further cost of living pressures.

Andy Burnham, the prime minister, made an early decision to cut VAT on electricity bills to ease household budgets, but this move may be overwhelmed by wider price rises. Food prices have been relatively stable so far, with a 1.3% annual increase in July, but experts warn of worse to come due to supply chain disruptions and extreme weather.

The Bank of England's policymakers are watching inflation closely, as they consider whether to raise interest rates next month. However, core inflation, which excludes volatile fuel and food prices, remained unchanged at 2.6%, suggesting that 'second-round effects', where workers bid up their wages and embed inflation in the wider economy, have yet to materialize.

With rising energy bills and higher borrowing costs, the government is facing a tough decision on how to support households. The TUC general secretary, Paul Nowak, has called for more government action to support households in the coming months.