UK inflation climbs to 2.9% as energy price cap hike bites

British inflation accelerated in July, reaching its highest level since March, as households faced a sharp increase in energy costs. The Office for National Statistics reported that annual consumer price inflation rose to 2.9%, up from a 15-month low of 2.6% recorded in June.

The uptick was widely anticipated by economists, who had forecast a rise to 2.9%. The Bank of England, however, had predicted a slightly smaller increase to 2.8% in its projections published at the end of last month.

The main driver behind the surge was a 13% increase in the energy price cap set by regulator Ofgem, which pushed up household energy bills during the month.

Core inflation, which strips out volatile energy and food prices, came in at 2.6% — slightly above the 2.5% that economists had expected.

Responding to the data, finance minister John Healey said that "Iran war inflation continues to impact prices here at home, but Britain's economy is resilient."

Financial markets showed little immediate reaction to the figures, with sterling and British government bond futures holding steady, as the data was broadly in line with expectations.