The CPI was 3.6% in the 12 months to June and 3.4% in the 12 months to May.
The CPI including owner-occupiers’ housing costs (CPIH) was up by 4.2%, an increase from 4.1% in the 12 months to June this year.
The ONS noted that transport – particularly air fares – made the “largest upward contribution” to the monthly change in the CPIH and CPI figures. It also said “housing and household services, particularly owner-occupiers’ housing costs, made a large, partially offsetting, downward contribution in CPIH”.
Core CPI (CPI excluding energy, food, alcohol, and tobacco) for July came in at a rise of 3.8%, marginally up from 3.7% in June.
Aldermore Insights with Jon Cooper: Edition 6 – Busy lives, bigger pressures: why switching off matters more than ever
Sponsored by Aldermore
Further base rate cuts this year are unlikely
The Bank of England base rate was cut to 4% just two weeks ago, but these latest inflation figures mean the chances of any further reductions this year are slim.
Peter Stimson, director of mortgages at MPowered, said: “This latest jump in inflation will slam the door on the prospect of any meaningful reduction in mortgage interest rates in the coming weeks.
“Inflation is back with a vengeance and the Bank of England’s prediction that CPI will hit 4% in September, which caused gasps when it was made less than a fortnight ago, now looks almost rose-tinted.
“At 3.8% a year, prices are now rising at nearly double the bank’s 2% target, and this will force the bank to rein in consumer spending by delaying any further reductions to the base rate. Hopes of another base rate cut this year now look decidedly optimistic.
“The mortgage swaps market, which tracks interest rate expectations and is used by mortgage lenders to determine the fixed interest rates they offer to borrowers, had been suggesting that the next base rate cut might come in November. But today’s painful jump in inflation means that base rate cut may now be pushed back into 2026, and as a result, we are unlikely to see any further rate cuts from lenders in the immediate term.
“Competition between lenders is intense, but mortgage rates may well have fallen as far as they can for now. They may even creep up over the next month or so as lenders recalibrate in response to rising swap rates.”
