UK inflation rate rises for the first time since December – what it means for your money

THE UK'S rate of inflation rose in July for the first time since December in a blow for households.

The Consumer Price Index (CPI) measure of inflation hit 2.2% in the 12 months to July, said the Office for National Statistics.

1

Economists and analysts had been predicting it would rise to 2.3% last month.

Inflation is a measure of the cost of the average basket of goods, which means if it is rising, it's bad news for shoppers.

Grant Fitzner, chief economist at the ONS, said July's increase was due to domestic energy costs.

He commented: "Inflation ticked up a little in July as although domestic energy costs fell by less than a year ago.

"This was partially offset by hotel costs, which fell in July after strong growth in June.

"The increase in cost of goods leaving factories slowed a little in the year to July, led by falling petrol prices.

"Meanwhile, raw material prices picked up for the first time in over a year, driven by smaller falls in gas and electricity costs."

The rise in the CPI measure of inflation in July is the first since December last year, when it increased from 3.9% to 4%.

But it has slowed since then, hitting the the Bank of England's (BoE) 2% target in May and staying there in June.

Inflation has also slowed significantly since hitting a peak of 11.1% in October 2022 due to soaring wholesale energy prices.

WHAT IT MEANS FOR YOUR MONEY

Rising inflation indicates that the cost of goods and services is increasing.

So, if it is rising it means the cost of your everyday purchases is also going up.

However, Alice Haine, personal finance analyst at Bestinvest, said there was no need for households to worry too much after today's figures.

She commented: "An uptick in the headline inflation figure can be a worry for consumers as it diminishes spending power and erodes savings, making it harder for people to maintain their living standards.

"However, with inflation still at a significantly lower level than the 11.1% it hit in October 2022, households have no need to panic just yet."

The latest figures will give the BoE something to ponder after it cut the base rate from 5.25% to 5% at the start of the month though.

The central bank can raise the base rate to slow inflation, but any rise also has a negative knock-on effect on mortgage owners.

That's because the base rate is what the BoE charges to smaller high street banks who then pass this on to customers.