Labour face battle with inflation set to rise above 2% target – live

Economists expect official figures on Wednesday to show that inflation rose above the Bank’s 2% target in July, driven in part by holiday-related price rises for airfares and hotels.

nother factor is energy prices. Bills fell sharply between the first six months of 2023 and of 2024, pulling down the overall inflation figure, but they fell more gradually between July 2023 and this year, meaning it will have less downward impact, ultimately increasing the year-on-year rate of inflation.

Inflation hit a peak of 11.1% in October 2022, after a sharp rise in energy prices sparked by Russia’s invasion of Ukraine.

Consultancy Pantheon Macroeconomics said it thinks inflation rose 2.3% between July 2023 and 2024, after it held at 2% for the years to May and June.

Rob Wood, Pantheon’s chief UK economist, said: “The price of a one-night hotel stay has been very strong this year, partly reflecting a new seasonal pattern since Covid… as well hotels likely charging a form of surge (demand-based) pricing.

“The ONS surveys only about 100 hotels, which means outliers, such as a Welsh hotel price in June boosted by demand from a Pink concert, can distort the figures,” he said.

“But some hotel price inflation is genuine, as a range of CPI service components related to travel or that are labour-intensive have been strong this year,” he added.

The Bank of England (BoE) defines inflation simply as a term used by economists to “describe the increase in prices over time”.

Rising costs of goods and services on the UK high street indicate that the value of the British pound is in decline, which in turn means a reduction in consumers’ purchasing power and therefore their quality of life, as they are discouraged from spending more than they can afford.

This in turn eats into national economic growth.

Good evening, and welcome to our inflation blog that will cover analysis and reaction to the figures that are due to be released on Wednesday.