Inflation rise leaves industry unshaken but could 'shatter hopes for a second cut' in September




CPI rose by 2.2% in the in the 12 months leading up to July 2024, a 0.2% rise from previous month, according to ONS statistics.

The government 2% target was hit in the 12 months leading to May of this year, the first time the number had been reached since July 2021.

Meanwhile, CPIH also increased to 3.1% in the same period, up by 0.3% since June 2024.

The largest downward contribution to CPI and CPIH was restaurants and hotels, while the largest upward contribution came from housing and household services.

Industry professionals commented on the latest inflation data:

Ben Thompson, deputy CEO at the Mortgage Advice Bureau:

“It’s been a good August for those with mortgages and, indeed, first time buyers. A slight uptick in inflation in July therefore shouldn’t dampen spirits too much, and to some degree was expected.

“However, it’s important to note that inflation holding steady (or indeed falling back down to 2%) in the next few months will be vital to encourage more interest rate cuts from the Bank of England. That path however is also currently expected too.

“For now, lenders would have already factored in the last rate reduction and will be basing current fixed rates on future interest rate expectations, so we wouldn’t expect this to have a big impact on the rates currently being offered." 

Richard Pike, chief of sales and marketing at Phoebus:

“This first rise in inflation in 2024 might shatter hopes for a second cut in the Bank Rate on 19th September.

“In their August monetary policy report, the BoE did predict a slight uplift in inflation, and advised a cautious approach to further rate cuts.


“It was already a close five to four vote by committee members in August so, with rising inflation, it will be a surprise if they don’t stick at 5% come September.

“It’s a real balancing act. On the one hand, you have economists warning of increasing inflationary pressures in the coming months.

“On the other hand, unemployment is expected to rise, which would put more pressure on the economy when it’s just starting to recover from the 2023 recession.

“It will be interesting to see what tomorrow’s monthly GDP figures look like from the Office for National Statistics. They will also influence the Bank’s September decision on whether or not to drop the bank rate.”

Jatin Ondhia, CEO at Shojin:

“This is a timely reminder, if it were needed, that inflation remains a significant challenge — a challenge to consumers, investors, the government and the BoE.

“The Bank’s interest rates hikes may have steadily brought inflation under control, but there are numerous factors that could drive it back up, and while today’s figure is no reason for panic, it shows how persistent inflationary pressures are likely to be over the coming months.

“Investors must evaluate accordingly and consider how well-positioned their portfolios are to generate returns in the face of stickier-than-anticipated inflation.

“Diversification and agility will prove key in navigating this testing climate. It should be expected that resilient markets — such as real estate — will continue to attract investor demand, while alternative investments will offer investors the chance to diversify their portfolios if that is indeed their strategy of choice.”

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