UK Inflation Set to Surge as Energy Price Cap Hike Takes Effect

UK inflation is expected to surge in July, rising to 2.9% according to most experts, after a 13% hike in Ofgem's energy price cap last month. The average gas and electricity bill increased by £221 to £1,862 a year, adding 0.5 percentage points to inflation for July.

The Government's Great British Summer Savings Scheme may have helped lower prices on family attractions and children's meals, but it hasn't been enough to prevent inflation moving further away from the Bank of England's 2% target.

Economists warn that the energy price cap rise alone will erase any progress towards the 2% target. There are also concerns that the Iran war could send energy costs even higher over the winter months, and as the hot weather damages crops and puts food costs under pressure.