Prices in the UK are rising at their fastest pace since January 2024, piling pressure on households and policymakers.
Official data from the ONS showed inflation hit 3.8% in July, up from 3.6% in June and well above expectations of 3.6%. Economists now expect the figure to touch 4% by year-end.
Core inflation, which strips out volatile energy and food prices, also rose to 3.8%, defying forecasts it would hold steady at 3.7%. The Bank of England’s target remains 2%.
Higher transport costs drove the surge. Air fares spiked 30.2% month-on-month, the largest jump since records began, while restaurant, hotel and food prices also accelerated. Food inflation is now running at 4.5% annually, marking a fourth straight increase and putting further strain on consumer budgets already stretched by housing costs.
The retail price index, which helps determine regulated rail fare increases, came in at 4.8%. That could mean ticket prices rising by nearly 6% in 2026, adding another burden for commuters.
Chancellor Rachel Reeves said inflation was far below the double-digit levels seen under the previous government, but admitted “there’s more to do to ease the cost of living.”
Economists warned the latest rise complicates the Bank’s position. Nicholas Hyett of Wealth Club said the combination of rising prices and slowing labour markets risks tipping Britain into stagflation, “the worst of all worlds.”