UK Inflation Set to Rise as Ofgem Price Cap Takes Hold

UK inflation data for July matched expectations, with headline Consumer Price Index (CPI) rising to 2.9% year-over-year and core CPI steady at 2.6%, according to Deutsche Bank's Chief UK Economist Sanjay Raja.

Raja highlights energy price increases from the Ofgem Price Cap as a key driver of inflation, with base effects also contributing to the higher figure. In contrast, food and services inflation eased in July, with services CPI slowing to 3.4% year-over-year.

Despite this, Raja sees further upside in CPI later this year, predicting that it will peak near 3% year-over-year. He warns of persistent risks for the Monetary Policy Committee (MPC), citing energy inflation as volatile and uncertain due to ongoing tensions in the Middle East.