UK inflation jumps to four-month high in July

British inflation rose to the highest in four months in July, mainly driven by decision of authorities to allow energy companies for maximum charges for the households, while the situation in the Middle East remains fragile, with high risk of escalation that would further lift inflation.

Consumer Price Index jumped to 2.9% in twelve month to July, from 2.6% previous month (the lowest in over one year) in line with expectations, while monthly inflation rose 0.3% in July from 0.1% in June.

Core inflation, which excludes volatile food and energy components, was unchanged at 2.6% (y/y) in July, but ticked above 2.5% forecast.

The same report showed that Services inflation, BoE’s gauge of domestically generated price pressures, eased to 3.4% in July from 3.6%, in line with expectations.

Another indicator showed that food and non-alcoholic drink price inflation eased to 1.3% in July (the lowest nearly two years) impacted by strong supermarket competition which has helped to absorb the shock.

Fresh rise in inflation sends warning to the Bank of England, following the data released a day earlier which showed slight cooling in the UK labor market, although most analysts sees the economy resilient that adds to wide expectations that the central bank would keep interest rates unchanged for the rest of the year.