The UK’s expansion rate has increased interestingly this year, official figures show.
In the year to July, prices increased by 2.2% overall, slightly higher than the Bank of England’s target of 2%, where the rate had been since May. This increase was widely anticipated and was caused by lower gas and electricity prices than a year earlier. The increment is additionally not exactly numerous business analysts had anticipated.
The Bank of England expects inflation, which measures the rate at which prices rise, to rise to 2.75 percent in the coming months before falling below 2 percent the following year. The latest figures indicate that prices are now rising faster across the UK than in previous months, but still at a slower rate than in 2022 and 2023, when households were particularly hard hit by higher bills for food and energy.
Before its next meeting on September 19, it will release a second set of data on inflation, employment, and wages.
The Bank had increased interest rates to combat rising inflation, but they were last reduced to 5% from 5.25 percent last month, marking the first decrease since the pandemic began.
Experts have been predicting additional cuts this year, and investors are now raising their bets that the Bank will opt for a cut in September. However, while higher rates can be beneficial for savers, they may also increase the cost of mortgages and other loans for consumers.
Sanjay Raja, boss UK financial specialist at Deutsche Bank Exploration, said: ” It is no longer out of the question to cut rates in September. Furthermore, it is entirely conceivable that we will experience additional rate cuts this year.
However, Capital Economics deputy chief UK economist Ruth Gregory stated that the data on Wednesday “may not alleviate the Bank’s concerns about persistent price pressures entirely.”
When determining interest rates, the Bank also considers factors such as inflation in the services sector.
Even though prices in this sector decreased by 5.2% in July, this was in part due to the high volatility of hotel stays and airfare.
Gregory added, however, that she anticipates the Bank reducing its main interest rate to 4.5 percent from 5% this year.
Businesses, which have had to deal with higher rates and rising inflation over the past few years, may benefit from interest rate reductions.
The proprietor of Marrocco’s restaurant and ice cream shop in Hove, Livia Marrocco, stated to the BBC: Products are increasing. The ingredients have increased. We have put costs up somewhat.”
However, she stated that the favorable weather and the upcoming school holidays had been bringing in more customers, so things had improved recently.
After the war in Ukraine and supply chain problems caused by the pandemic, inflation rose to 11.1%, driving up the cost of living for millions of people.
However, up until June, when the Bank of England increased interest rates to reduce consumer demand, it had been steadily declining.
According to Office for National Statistics (ONS) chief economist Grant Fitzner: In spite of a decrease in domestic energy costs by less than a year ago, inflation increased slightly in July.
“This was partially offset by hotel costs falling in July after strong growth in June.” On Wednesday, Mr. Fitzner also stated on the BBC’s Today program that “under the hood” price increases remained under control, with services inflation remaining unchanged and food prices remaining the same.
He stated, “This still suggests that inflation pressures are fairly moderate at least in the short run.”
Between September 2021 and September 2023, food and beverage prices increased by 28.4%, according to the Institute for Fiscal Studies.
According to the most recent analysis, the sharpest price increases had been applied to cheaper brands, so households with lower incomes saw their food bills rise significantly more than those with higher incomes.
However, according to the ONS, food price inflation had decreased to just 1.5% in July.
The new Labour government, according to Treasury chief secretary Darren Jones, is “under no illusion” about the challenges households face.
However, Jeremy Hunt, shadow chancellor, stated that the new figures demonstrate that “more needs to be done to keep inflation down.” The possibility that further reductions in interest rates will reduce the cost of borrowing could result in an increase in housing market activity.
Even though the data predate August’s interest rate cut, separate ONS figures published on Wednesday show that house prices have been rising.
According to the ONS, property prices in the UK increased by 2.7% in the year to June.
The average house price in England rose by 2.4% to exceed £300,000.
The average cost of a home in England was £305,000 last year, up £7,000 from the previous year. This compares to £216,000 in Wales, £192,000 in Scotland, and £185,000 in Northern Ireland. Check your cupboards to see what you already have. Go to the reduced section first to see if it has anything you need. Buy things close to their best-before dates for less, and use your freezer.
