The Consumer Prices Index (CPI) rose by 2.2% in the 12 months to July 2024, up from 2.0% in June 2024.
Understanding the Recent Rise in UK Inflation
Current Inflation Rate
- Consumer Prices Index (CPI): The CPI rose by 2.2% in the 12 months to July 2024, up from 2.0% in June 2024
- Consumer Prices Index including owner occupiers’ housing costs (CPIH): The CPIH increased by 3.1% in the same period, up from 2.8% in June 2024.
Key Drivers of Inflation
- Energy Prices: Global energy prices have surged, significantly impacting household energy bills.
- Food Costs: Food prices have risen due to supply chain disruptions and increased production costs.
- Housing Costs: Rising costs in the housing sector, including rent and mortgage interest payments, have also contributed to inflation.
Impact on Cost of Living
- Everyday Expenses: The increase in inflation means higher prices for everyday goods and services, such as groceries, utilities, and transportation.
- Wages vs. Inflation: While wages have been increasing, they may not be keeping pace with inflation, leading to a reduction in real purchasing power for many households.
Response from the Bank of England
- Interest Rate Hike: To combat rising inflation, the Bank of England has increased the base interest rate to 5%. This is the highest level in 14 years.
- Objective: The aim is to reduce inflation by making borrowing more expensive and saving more attractive, thereby reducing spending and helping to bring down prices.
What This Means for You
- Borrowing Costs: If you have a variable rate mortgage or loans, you might see an increase in your monthly payments. Consider reviewing your financial commitments and possibly locking in fixed rates.
- Savings: Higher interest rates can benefit savers as banks may offer better returns on savings accounts. Look for high-interest savings accounts to make the most of the current rates.
- Budget Adjustments: With rising costs, it’s crucial to revisit your budget and identify areas where you can cut back on non-essential spending.
Government Measures
- Monitoring and Support: The government is closely monitoring the situation and may introduce measures to support households and businesses affected by rising costs.
Final Thoughts
Inflation can be challenging, but with careful planning and informed decisions, you can navigate these changes effectively. If you have any questions or need personalised advice, please don’t hesitate to reach out.