IoD press release  Further rise in inflation piles pressure on households and businesses

“Inflation has risen again this month – slightly ahead of consensus but in line with the Bank of England’s expectations. Both goods and services inflation rose in July, with the latter pushed higher than expected, with airfares rising by a chunky 30.2%, alongside a fourth consecutive rise in food inflation to 4.9%. UK inflation has also notably diverged substantially from our European peers since April due to higher energy and utility bills, and rising employment costs.

“The MPC’s recent vote split rightly highlights concerns about the stubbornness of UK inflation. CPI is set to reach 4.0% in September – twice the target – with the pressure coming from the parts of the basket most felt by consumers. While this spike is expected to be temporary, inflation is not expected to be back within the target range until the second half of 2026. That raises a real risk that elevated inflation feeds into expectations and generates second-round effects. September’s rate decision is expected to be a hold, but don’t be surprised if sticky inflation puts paid to further rate cuts this year.”