UK inflation rose to 3.8% in July 2025, driven mainly by increases in air fares and food prices, remaining at the highest level since January 2024.

Economists forecast that CPI inflation will peak around 4% in September before beginning to decline, with some analysts warning it could surpass expectations due to rising business costs.

The surge in inflation has been influenced by factors such as a spike in air fares, food prices, and the impact of Oasis concerts on hotel demand and prices.

Wage growth is expected to slow, which could reduce consumer spending power and influence future interest rate decisions.

While the Bank of England anticipates inflation will decrease after September, concerns remain about ongoing economic strain and the effects of fiscal policies.

Rising inflation is undermining the UK government's efforts to improve living standards, as real incomes recover slowly amid inflation and a cooling labor market.

Inflation continues to challenge households and businesses, with uncertainty about future price developments and ongoing economic pressures.

The UK government is actively working to ease the cost of living through measures like raising the minimum wage and expanding support programs, but inflation remains a significant obstacle.

Deutsche Bank's chief UK economist suggests the Bank of England might adopt a more patient approach, holding interest rates steady due to conflicting signals between inflation momentum and the labor market.

Despite recent rate cuts, experts criticize the Bank of England's policies amid rising inflation, warning that further reductions could de-anchor inflation expectations.

Long-term projections indicate inflation may not reach the 2% target until 2027, with gradual easing of pay and service inflation expected in 2026.

Rising costs are causing concern among households, especially lower-income groups, and are impacting businesses like bakeries and farms, which face increased expenses.