What the rise in UK inflation means for the economy

Overall inflation is up, but prices are down…

In July 2024, the UK’s overall inflation rate increased from 2.0% in June to 2.2%. This is the first time inflation rates have increased in the UK since December 2023. However, despite this rise, the actual prices consumers paid for their overall basket of goods and services fell by 0.2% compared to the previous month.

However, inflation for services is down, but prices are up… 

At the same time, the inflation rate for services, which has been a concern, dropped significantly from 5.7% to 5.2%. Yet, the cost of services went up by 0.5% in July compared to June. This might sound worrying, but it is normal for service prices to increase in July. Historically, the average increase for this month is higher, at 0.6%.

The bigger picture…

Financial markets are now predicting a slightly higher chance that the Bank of England will cut interest rates in September. However, policy makers concerned about inflation will not find comfort in these latest figures. 

The big picture is that the real Bank Rate is 2.8%, which falls within restrictive territory. It’s important to keep this in mind despite the monthly fluctuations.