UK inflation rises in July on gas costs; Burnham cites relief steps

Bank of England held rate at 3.75% though inflation above target

UK inflation increased in July, driven by a surge in gas costs, after the temporary US-Iran ceasefire expired Monday without a permanent deal, The Guardian reported. Oil prices rose following the lapse of the ceasefire, according to the Guardian’s business live coverage.

The Guardian’s business live coverage reported that JP Morgan warned the rebound in UK inflation is a “warning shot for what could come next.”

Prime Minister Andy Burnham has pledged to ease cost of living pressures and has already announced measures including a tax cut on household electricity prices and a cap on bus fares. Responding to the latest inflation figures, John Healey said: “Iran war inflation continues to impact prices here at home, but Britain’s economy is resilient.”

Healey said the government has cut VAT on electricity bills and capped bus fares at £2 “to give breathing space to those feeling the strain,” adding: “There is more to do to restore hope and build a stronger economy where prosperity is shared more fairly across Britain.”

Analysts expect inflation to rise further toward the end of the year as higher energy costs feed through to people’s bills, with no signs of progress on a deal to end the Middle East war.

The Bank of England held its benchmark interest rate at 3.75% last month even though inflation was above its 2% target.

Jonathan Raymond, investment manager at Quilter Cheviot, said: “A renewed spike in inflation has been expected as the war in the Middle East continues to navigate a clunky ceasefire.” Things “remain far from normal” in the Strait of Hormuz, he said, and look unlikely to be resolved any time soon, “meaning pressure is likely to remain on prices for the remainder of the year at least.”

MSI previously reported that oil prices topped $90 a barrel after the temporary US-Iran ceasefire lapsed, with Felix Feather of Aberdeen expecting inflation to jump at the next reading due to the uplift in the energy bill price cap. The figures released the following day confirmed that forecast, with gas costs driving July’s increase in inflation.