July inflation down but Bank may be forced to raise rates say analysts

July inflation figures are down on recent months, City analysts have claimed, but warned that this was not likely to be sustained or ward off the risk of a further rate rise.

The dip, which came despite rising energy costs, was due to summer sales on clothes and furniture reducing price inflation from 2.5 per cent in June to 2.4 per cent in July.

But prices in the volatile food market are likely to head up again following July’s heat wave, adding inflationary pressure, alongside energy increases and rising university fees.

With inflation remaining well above the targeted maximum rate, the Bank of England may not be left with many options, Peter Dixon of Commerzbank told the Guardian.

“Given the lack of spare capacity in the economy and given that inflation will be pushing towards three per cent by the end of the year, the Bank of England maybe won’t have any choice but to raise rates once more.”

Energy firm EDF will increase gas prices 19 per cent and electricity 9.1 per cent later this month, while British Gas will be adding 12.4 per cent and 9.4 per cent respectively.

© Adfero Ltd

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