Bank of England may hold rates steady after UK inflation data shows energy-driven uptick

UK inflation ticked higher in July, landing at 2.9% year-on-year, up from 2.6% in June. The increase was largely driven by energy costs, core measures stayed well-behaved, and the Bank of England now has a fairly clean runway to leave interest rates exactly where they are. The Office for National Statistics published the data on August 19, and it landed almost precisely where economists had penciled it in. The monthly CPI increase came in at 0.3%, with housing and household services doing most of the heavy lifting thanks to an upward adjustment in the energy price cap that made gas bills notably pricier. The energy price cap did what energy price caps do Strip out the volatile energy component and the picture looks considerably more benign. Core inflation remained contained. Analysts described the domestically generated inflation dynamics as broadly benign. For context, UK inflation peaked at a bruising 11.1% in October 2022. The journey from there to 2.9% represents a dramatic cooldown, even if the destination is still a bit north of the BoE’s 2% target. Rate decision: September and beyond The Bank of England’s Monetary Policy Committee next convenes on September 17, and the conse...