United Kingdom CPI inflation jumps to 2.9% YoY in July, as expected
The United Kingdom (UK) headline Consumer Price Index (CPI) climbed 2.9% over the year in July, compared to a rise of 2.6% in June, the data released by the Office for National Statistics (ONS) showed on Wednesday.
Markets predicted a 2.9% growth in the reported period. The UK inflation reading was well above the Bank of England’s (BoE) 2% inflation target.
The core CPI (excluding volatile food and energy items) rose 2.6% year-over-year (YoY) in the same period, compared to June’s 2.6% print and came in hotter than the forecast of 2.5%.
Meanwhile, the monthly UK CPI arrived at 0.3% in July versus an increase of 0.1% reported in June, in line with the market consensus of 0.3%.
GBP/USD reaction to the UK CPI inflation data
The British Pound (GBP) edges slightly higher in an immediate reaction to the UK inflation report. At the time of writing, the GBP/USD pair is trading 0.08% higher on the day to trade at 1.3545.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.20% | -0.16% | -0.03% | 0.03% | 0.27% | 0.36% | -0.12% | |
| EUR | 0.20% | 0.19% | 0.18% | 0.23% | 0.42% | 0.56% | 0.09% | |
| GBP | 0.16% | -0.19% | 0.06% | 0.04% | 0.24% | 0.37% | -0.15% | |
| JPY | 0.03% | -0.18% | -0.06% | 0.06% | 0.23% | 0.37% | -0.12% | |
| CAD | -0.03% | -0.23% | -0.04% | -0.06% | 0.19% | 0.31% | -0.19% | |
| AUD | -0.27% | -0.42% | -0.24% | -0.23% | -0.19% | 0.14% | -0.38% | |
| NZD | -0.36% | -0.56% | -0.37% | -0.37% | -0.31% | -0.14% | -0.52% | |
| CHF | 0.12% | -0.09% | 0.15% | 0.12% | 0.19% | 0.38% | 0.52% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
This section below was published at 02:00 GMT as a preview of the UK Consumer Price Index (CPI) inflation data.
- The United Kingdom’s Office for National Statistics will publish the July CPI data on Wednesday.
- Annual UK headline inflation is set to pick up in July, while core CPI is expected to cool slightly.
- The UK CPI report is set to rock the British Pound as bets on a September interest-rate hike by the BoE build.
The United Kingdom (UK) Office for National Statistics (ONS) will release the high-impact Consumer Price Index (CPI) report for July at 06:00 GMT.
The inflation data could significantly affect market expectations for a Bank of England (BoE) interest rate hike in September, stirring volatility in the British Pound (GBP) as traders assess the impact of energy price swings driven by the Middle East war.
What to expect from the next UK inflation report?
The UK Consumer Price Index is expected to rise 2.9% year-over-year (YoY) in July, up from 2.5% in June. If the reading comes as anticipated by economists, it would be the highest in four months and surpass the BoE’s forecast of 2.8%, moving further away from its 2% target.
Core CPI inflation, which strips out energy, food, alcohol, and tobacco prices, is expected to ease slightly to 2.5% YoY in the reported period.
According to industry experts, official data is expected to show that service inflation, a key measure for BoE policymakers, arrived at 3.4% YoY in July.
Meanwhile, the British monthly CPI is seen rising by 0.3% in the same period after a 0.1% growth in June.
How will the UK Consumer Price Index report affect GBP/USD?
Amid signs of a disinflationary trend in the UK, the upcoming CPI data will be critical to gauging whether the trend is reversing and significant enough to nudge the BoE to consider an interest rate hike at its September 17 monetary policy meeting.
It’s the inflation print covering the month of the renewed outbreak of hostilities in the Middle East, which lifted Oil prices up by roughly 22%. Therefore, an uptick in headline British inflation, both monthly and annual, may not come as a surprise.
However, it remains to be seen whether the pick-up in inflation will likely sustain amid still elevated Oil prices, as US President Donald Trump said he has ruled out extending the Iran ceasefire deal.
This matters as BoE Governor Andrew Bailey said in his post-monetary policy meeting press conference in July that "if the Mideast conflict persists and we get second-round effects, we will likely need to raise rates.”
The July Monetary Policy Statement (MPS) read that "risks to inflation forecasts are tilted to upside, but scope remains for outlook to change materially depending on Iran war,” adding that "policy could need to react before inflation persistence risks materialise conclusively."
Back in July, Bailey and company left rates unchanged at 3.75% for the fifth consecutive meeting, as expected. However, the Monetary Policy Committee (MPC) voted 6-3 to hold rates, a more divisive vote than the 7-2 split predicted.
Let’s analyse two main potential scenarios for the UK CPI release.
Hotter-than-expected annual and monthly core CPI readings could lift the odds of a rate hike in September, as markets could view it as an insurance hike by the British central bank. In such a case, the Pound Sterling will receive fresh impetus, likely driving GBP/USD back above 1.3600.
Conversely, a surprise cool-off in core inflation could push back against BoE rate hike bets, checking the pair’s recent uptrend and fuelling a corrective pullback.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “GBP/USD holds a bullish near-term bias as spot remains comfortably above the major daily simple moving averages (SMA) clustered between roughly 1.3380 and 1.3440, suggesting a well-supported uptrend rather than a mere short-covering bounce. The 14-day Relative Strength Index at 62 hints that buyers still retain control.
On the downside, initial support is seen at the confluence zone of the 21-day, 100-day, and 200-day SMAs around 1.3420, forming a dense demand band just below. A deeper pullback would expose the 50-day SMA support at 1.3381, where dip-buying interest would be expected to emerge. Alternatively, recapturing the 1.3600 psychological level is critical to sustaining a meaningful uptrend. The next topside target is seen at the May high of 1.3658,” Dhwani adds.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
Economic Indicator
Core Consumer Price Index (YoY)
The United Kingdom (UK) Core Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. The YoY reading compares prices in the reference month to a year earlier. Core CPI excludes the volatile components of food, energy, alcohol and tobacco. The Core CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Next release: Wed Aug 19, 2026 06:00
Frequency: Monthly
Consensus: 2.5%
Previous: 2.6%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
Author
FXStreet Team
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