UK inflation steady at 2.2% ahead of Bank of England's next rate decision

Inflation in the United Kingdom remained unchanged at 2.2% in July, according to the Office for National Statistics (ONS).

The latest figures show that the Consumer Prices Index (CPI) 12-month inflation rate held steady in July, unchanged from June.

The ONS said that the main upward contributions to the annual inflation rate came from food and non-alcoholic beverages, clothing and footwear, transport, and alcohol and tobacco.

The Bank of England is widely expected to keep interest rates on hold at its next meeting on August 5.

The Bank has kept interest rates at a record low of 0.1% since March 2020 in an effort to support the economy during the coronavirus pandemic.

However, with inflation now above the Bank's 2% target, there is increasing speculation that the Bank could start to raise interest rates later this year.

The Bank's decision on interest rates will be closely watched by businesses and consumers alike.

A rise in interest rates would make it more expensive for businesses to borrow money, which could lead to higher prices for goods and services.

It would also make it more expensive for consumers to borrow money, which could reduce spending and slow economic growth.

The Bank is likely to take a cautious approach to raising interest rates, given the uncertainty surrounding the economic outlook.

The Bank is aware that raising interest rates too quickly could damage the economy, but it is also concerned that leaving inflation too high for too long could erode confidence in the pound and lead to even higher inflation in the future.

Here are some of the key points from the ONS inflation report:

• The CPI 12-month inflation rate was unchanged at 2.2% in July, compared with June.
• The main upward contributions to the annual inflation rate came from food and non-alcoholic beverages, clothing and footwear, transport, and alcohol and tobacco.
• The ONS said that the annual inflation rate is now at its highest level since March 2020.
• The Bank of England is widely expected to keep interest rates on hold at its next meeting on August 5.
• The Bank's decision on interest rates will be closely watched by businesses and consumers alike.
• The Bank is likely to take a cautious approach to raising interest rates, given the uncertainty surrounding the economic outlook.

Sources

1. ONS: Consumer price inflation, July 2021
2. Bank of England: Monetary Policy Summary and Minutes, June 2021