In the year ending in July, prices in the UK increased by 3.8%, mostly due to increases in the cost of food and airfare. According to figures from the Office for National Statistics (ONS), this indicates that inflation is at its highest level since January 2024 and is still much above the Bank of England’s objective of 2%.
Higher food prices were driven by rises in the price of beef, chocolate and confectionary, instant coffee, and fresh orange juice, while the timing of the school vacations probably contributed to the increase in flying tickets. Economists’ views that the Bank of England will reduce the pace of interest rate decreases are strengthened by the somewhat higher-than-expected increase in inflation.
The Retail Prices Index (RPI), another indicator of inflation, increased from 4.4% in June to 4.8% in the year ending July. In contrast to CPI, RPI takes into account items like building insurance and mortgage interest payments. In England, it is also used to predict future increases in train fares.
The 4.6% increase in rail rates this year was one percentage point more than the July 2024 RPI, which means that if the current trend continued, fares would increase by 5.8% in 2026. However, according to the Department for Transport, no decisions regarding the fares for the upcoming year have been made yet.
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