UK inflation rises to 3.8% in July, highest in 2025

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United Kingdom

British inflation accelerated more than expected in July, reaching its highest level since the start of 2024, official data showed Wednesday, adding more pressure on the UK government and economy.

The Office for National Statistics stated that the Consumer Prices Index rose to 3.8 per cent last month compared with an annual inflation rate of 3.6 per cent in June. The pickup, which analysts had forecast would reach only 3.7 percent, was driven by higher air fares and food prices.

The inflation update, coupled with Britain’s economy performing better than feared in the second quarter, fuelled expectations that the Bank of England could hold off on cutting interest rates again this year. In response to the data, finance minister Rachel Reeves said “there’s more to do to ease the cost of living.”

The government, led by Prime Minister Keir Starmer, increased a UK business tax from April, the same month that the country became subject to US President Donald Trump’s 10-percent baseline tariff on most goods.

Citing threats to growth from US tariffs, the Bank of England had cut its key interest rate by a quarter point to four percent in August. The BoE expects inflation to peak at four percent in September, before falling back.

Lindsay James, an investment strategist at Quilter, provided a grim outlook, stating, “There is considerable pain yet to come for consumers at a time when economic weakness in the UK is becoming further exposed.”

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