Inflation in the UK climbs to its highest level in several months this July

Britain’s inflation accelerated in July, rising to 3.8% from 3.6% in June, surpassing the forecast of 3.7% and marking the highest level since early 2024.

The latest data also revealed that the UK currently has the highest and fastest-rising inflation among the world’s major economies.

A key driver behind July’s figures was services inflation—the Bank of England’s preferred measure—which climbed to 5.0% from 4.7% in June, topping expectations of 4.9%.

Although wage growth has slowed, the UK’s labor market remains relatively tight, continuing to add upward pressure on prices.

The Bank of England’s forecasts for July (CPI at 3.8%, services inflation at 4.9%) were broadly in line with economists’ expectations (CPI 3.7%, services inflation 4.8%).

Stronger-than-expected CPI data has reduced the likelihood of further rate cuts in 2025, after the BoE delivered a 0.25% reduction earlier this month. Market bets on another cut this year have faded, with expectations now shifting towards the first quarter of 2026.

Beyond stubbornly high inflation—nearly double the central bank’s 2% target—the UK economy is also grappling with weak growth, a trend likely to persist into 2026.

According to BoE projections, inflation is set to remain above target until mid-2027, with a potential peak of 4% in September 2025, casting a darker outlook for the economy.