UK inflation hits 10.1% in July as food, energy prices surge

UK inflation hit a fresh 40-year high in July and surpassed analysts’ expectations as food and energy prices jumped, according to data released on Wednesday by the Office for National Statistics.

Consumer price inflation rose to 10.1% from 9.4% in June. This marked the highest rate since February 1982 and was above analysts’ expectations of 9.8%.

Core inflation, which strips out food and energy costs, increased to 6.2% from 5.8% a month earlier, coming in above forecasts of 5.9%.

Food inflation rose in July to 12.6% - its highest rate since August 2008 - from 9.8%.

ONS chief economist Grant Fitzner said: "A wide range of price rises drove inflation up again this month. Food prices rose notably, particularly bakery products, dairy, meat and vegetables, which was also reflected in higher takeaway prices.

"Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants also pushed up inflation in July.

"Driven by higher demand, the price for package holidays rose, after falling at the same time last year while air fares also increased.

"The cost of both raw materials and goods leaving factories continued to rise, driven by the price of metals and food respectively."

Earlier this month, the Bank of England lifted interest rates by 50 basis points - the biggest rate rise in 27 years - and warned that inflation would peak at 13.3% in October, up from a previous forecast of 11% and driven by energy prices.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: "These figures are likely to fuel speculation of another 0.5 percentage point interest rate rise next month, piling pressure on borrowers.

"The Bank is trying to bring core inflation down - a measure that strips out energy and food prices which are at the mercy of global markets. The fact that this rose in July, from 5.8% to 6.2%, means we can’t expect any let-up in rate rises. It means anyone who has been borrowing in a desperate attempt to make ends meet is going to face even harder challenges in the months to come."