KPMG’s chief economist Yael Selfin said July marked the start of a gradual rise in inflation, though she said Wednesday’s figure was not enough to spur change in the Bank of England’s interest-rate setting decisions.
But Selfin added that energy-related costs were expected to push inflation higher over the coming months to a peak of about 3.5%.
The inflation rate remains above the Bank’s 2% target – a level the Bank says keeps prices stable and allows both people and businesses to plan for the future.
Chief economist of Capital Economics, Ruth Gregory, expects inflation will fall to that target “by the end of next year” provided energy prices don’t rise much further.
She suspects the “Bank of England will keep rates at 3.75% this year and cut them to 3.00% next year”.
AJ Bell’s head of personal finance Sarah Coles inflation said inflation is “nothing like as dramatic as it was during the height of the cost-of-living crisis”.
She said that the price of some goods was falling, including jam, marmalade, honey, pizza and quiche, as well as men’s clothing and shoes.
But price stability remains elusive, said Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales.
“Rising inflation is likely to become the biggest threat to UK growth in the coming months as it eats into household budgets by increasing the cost of essentials,” he said.
He added drought-related increases in food prices were also on the the horizon.