![Inflation has risen for the first time since December.](https://img.huffingtonpost.com/asset/66bc4b972200005200ba6aff.jpeg?cache=a6Lplo8JTv&ops=scalefit_720_noupscale)
Inflation has just risen for the first time since December last year in a blow to the economy.
According to the latest update from the Office for National Statistics, the consumer price index rose from 2% in May and June to 2.2% in July.
Inflation – the rate at which prices increase over a 12-month period – is monitored by the Bank of England, and meant to be kept at 2%.
So is this small change a big deal? Here’s what you need to know.
Why has inflation gone up?
The ONS concluded price increases for housing and household services were the biggest upward pull for inflation, leaping from 2.3% in June to 3.7% in July.
The price for gas and electricity actually fell, by 7.8% and 6.8% respectively, but that decline is less than we’ve seen in other months – meaning the overall price for energy still contributed to the uptick in inflation.
For context, gas prices are around 68% higher than they were in March 2021 and electricity prices are around 45% higher.
However, it’s was not all bad.
Restaurants and hotels surprisingly fell in price (by 0.4%) and core inflation – that excludes alcohol, energy, food and tobacco – actually fell.
It dropped from 3.5% in June to 3.3% in the 12 months leading up to July.
The cost of services also fell from 5.7% to 5.2%, but inflation of food and non-alcohol beverages stopped falling – the first time since March 2023, when it was at the heady heights of 19.2% inflation due to a shortage in vegetables.
Instead, according to the Institute for Fiscal Studies, there was a phenomenon known as “cheapflation”.
That’s where Britain’s poorest households saw the bill for their weekly shop rise by much more than the rich, because the cost of the cheapest brands went up.
But, the overall change in inflation was still less than was expected – the City had anticipated it to creep up to 2.3%.
What does this mean for you and your finances?
This is nowhere near the crisis we faced in October 2022, when inflation skyrocketed to 11.1%.
But, as the Bank of England’s policymaker Catherine Mann warned earlier this week, it is too early for the fight to control inflation to be over.
It could mean the Bank of England is less enthusiastic about pulling down interest rates next time.
Interest rates define the general cost of borrowing in the UK, and act as the Bank’s main lever to control inflation.
The Bank dropped the Bank Rate (the leading interest rate) from 5.25% to 5% earlier this month, bringing some relief to borrowers – but today’s figures suggest that might not have been the beginning of a downward trend, as inflation is still proving to be sticky.
The ONS’s chief economist, Grant Fitzner said: “Inflation ticked up a little in July as although domestic energy costs fell, they fell by less than a year ago.
“This was partially offset by hotel costs, which fell in July after strong growth in June.
“The increase in cost of goods leaving factories slowed a little in the year to July, led by falling petrol prices. Meanwhile, raw materials prices picked up for the first time in over a year, driven by smaller falls in gas and electricity costs.”
How have the politicians reacted?
Darren Jones, chief secretary to the Treasury, said the new Labour government is “under no illusion” about the ongoing challenges people are facing.
The Tory shadow chancellor Jeremy Hunt, however, said it was clear there “is more to be done to keep inflation down”.
The Liberal Democrats’ treasury spokesperson Sarah Olney, said: “Today’s figures are a stark reminder that the cost-of-living crisis is far from over.”
She said the public are still “paying the price of Conservative mismanagement.”