Expert comment: UK inflation is rising again - what does it mean for your wallet?

“UK inflation climbed to 2.9% in July, up from 2.6% in June, moving further above the Bank of England’s 2% target and putting renewed pressure on household budgets.

“Energy bills were the main driver of the increase. Ofgem’s 13% rise in the energy price cap at the start of July resulted in the sharpest summer increase in household energy costs in four years. At the same time, the conflict involving Iran has unsettled global energy markets, adding further pressure to gas and electricity prices.

“There seems to be some better news. Food and drink inflation slowed to 1.3%, its lowest rate in nearly five years, while falling oil prices have helped ease some costs faced by businesses. But heatwaves, droughts and geopolitical tensions mean food and energy prices remain vulnerable.

“Economists expect inflation could reach around 3.5% by the end of the year, adding to the government's cost-of-living challenge and further complicating decisions over spending and borrowing in October’s budget.

“So, will the Bank of England raise interest rates next month? Probably not. With wage growth slowing, job vacancies at a five-year low, and much of the latest inflation being driven by higher energy prices, the Bank of England may simply wait it out, rather than raising interest rates in response to what could prove to be a temporary energy-driven spike in inflation.

“The bottom line? Inflation is heading up again, but the bigger question is whether this is a temporary energy-driven spike or the beginning of more persistent pressure on household budgets.”