UK's annual inflation rises above Bank of England target, first uptick this year

Britain’s annual inflation rate rose in July for the first time this year and is now back above the Bank of England’s target, official data showed on Wednesday.

The Consumer Prices Index (CPI) climbed 2.2 percent in the 12 months to July compared with a 2.0-percent annual gain in June, the Office for National Statistics said in a statement.

The rise was “mainly driven by prices of gas and electricity falling by less than a year ago”, the ONS added.

The faster inflation rate could keep the Bank of England from cutting interest rates quickly, according to analysts.

Earlier this month, the BoE trimmed borrowing costs for the first time since the onset of the Covid pandemic after UK inflation retreated from four-decade highs back towards its 2-percent target.

Wednesday’s data “may not alleviate the Bank’s concerns about persistent price pressures entirely”, noted Ruth Gregory, deputy chief UK economist at research group Capital Economics.

“And it probably isn’t enough to prompt a back-to-back interest rate cut in September.”

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Gregory added, however, that she expects the BoE to cut again this year, bringing its main interest rate down to 4.5 percent from 5.0.