UK inflation rose to 2.2% in July, back above Bank of England’s 2% target

U.K. inflation rose to 2.2% in July, coming in slightly below expectations, data from the Office of National Statistics showed Wednesday.

Economists polled by Reuters had been expecting headline CPI to come in at 2.3%.

This is compared to June’s reading of 2%, which was unchanged from the previous month and in line with the Bank of England’s target rate.

The data comes after the Bank of England earlier this month cut interest rates for the first time in over four years, taking the key bank rate to 5%. It had previously been held at a 16-year high of 5.25% since August 2023.

The BOE said in its Monetary Policy Report, also released at the start of the month, that it expects CPI to increase again in the second half of 2024.

Uncertainty remains about when the central bank will cut rates again, and whether another cut will even take place this year. The BOE’s Monetary Policy Committee is set to meet three more times in 2024.

Ahead of the release of Wednesday’s inflation data, markets were pricing in an around a 64% chance of the BOE keeping rates unchanged in September, and a roughly 79% chance of another rate cut in November, LSEG data showed.

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