UK Inflation Set to Surge as Energy Prices Jump

The UK's inflation rate is expected to surge in July due to the recent energy price cap hike, according to experts. The Consumer Prices Index (CPI) inflation rate is forecasted to rise to 2.9% in July, up from a 15-month low of 2.6% in June.

The average gas and electricity bill increased by £221 to £1,862 a year after Ofgem's energy price cap was raised by 13%. This hike alone is expected to add 0.5 percentage points to inflation for July, according to Investec economist Ellie Henderson.

There are concerns that inflation will continue to rise as the Iran war could send energy costs higher over the winter months and hot weather damages crops, putting pressure on food prices. Victoria Scholar, head of investment at Interactive Investor, forecasts inflation peaking above 3% later this year.