The latest inflation data shows the Consumer Prices Index (CPI) rose to 3.8% in July, up from 3.6% in June. The Bank of England forecasts inflation to peak at 4% before it begins to decline, meaning wealth experts would be forced to guide clients through a period of economic uncertainty.
Wealth experts have shared their thoughts:
Susannah Streeter, head of money and finance, Hargreaves Lansdown, said:
“The pressure cooker of prices is on the boil again, with rising air fares, hotel bills and groceries keeping costs steamy. Inflation has kept track with what the Bank of England predicted, rising to 3.8% – veering even further away from the 2% target. As people ringfenced budgets to enjoy themselves on holiday, they were willing to shell out for expensive seats on planes, with the cost of airfares rising by 30.2% between June and July. There appeared to be a small lift in spending around the Oasis tour, with hotel and restaurant spending rising 3.4%. However, Taylor Swift still had the edge when it came to the inflation effect, given that the prices jumped more markedly when she toured the UK last June, with a monthly rise of 6.3% clocked up for the sector.“
Luke Bartholomew, Deputy Chief Economist, at Aberdeen said:
“Inflation was always likely to rise today, but this report is definitely on the hotter side. In particular, services inflation, which the Bank of England watches very closely as a measure of underlying inflation pressure, popping higher will be a source of concern among policymakers. With inflation likely to rise further in coming months and wage growth gradually slowing, it is quite possible we move back to a period of sustained negative wage growth. All of which will keep the economy feeling more “stagflationary” than comfortable. The outlook for interest rates is therefore looking more uncertain. We continue to expect another cut in November, but the risk of a more sustained pause in the cutting cycle has increased.”
Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services, said:
“Following June’s surprisingly strong consumer price pressures, July’s data confirms that inflationary pressures are building towards the Bank of England’s upwardly adjusted 4.0% forecast peak next month.
“Today’s data confirms that headline prices have increased to 3.8%, a reflection of both rising fuel and food prices, the latter of which is now on a clear upward trajectory which may not peak until later in the year. With the Bank of England’s Monetary Policy Committee (MPC) paying close attention to trends in service sector inflation, today’s confirmation that prices nudged higher again last month, from 4.7% to 5%, will cause concern.”
“At its 7th August rate-setting meeting, the MPC elected to cut the base rate for a fifth time in this slow-paced cycle, to 4%. However, the decision passed by a razor-edge margin after an unprecedented second vote and was accompanied by a hawkish tilt in the accompanying statement’s language, reflecting the Committee’s persistent concerns regarding rising price pressures.
“Today’s data is likely to harden rate-setters’ resolve that any future rate cuts will be conditional on consumer prices adjusting to a lower pathway. With a peak in prices not anticipated until later in the year, the Bank’s scope to provide much by way of monetary policy offset will be severely limited, in the wake of what looks likely to be another tough Budget.”
Richard Flax, Chief Investment Officer at Moneyfarm, said:
“UK CPI rose to 3.8% year-on-year in July, up from 3.6% in June and above both market expectations (3.7%) and the Bank of England’s forecast (3.76%). This marks the highest annual inflation rate since January 2024, driven by rising airfares, food prices, and energy costs. Structural factors like April’s increase in employers’ national insurance and minimum wage adjustments are also feeding through to consumer prices.
“The Bank expects inflation to peak at 4% in September before easing in 2026. However, July’s data complicates the outlook. Persistent price pressures argue against premature rate cuts, while weakening growth and employment suggest the need for caution. Markets still anticipate rate cuts later this year, but July’s figures highlight the challenge: balancing inflation control with the growing drag from tight monetary policy.”
Michael Browne, Investment Strategist at Franklin Templeton Institute, said:
“The importance of today’s CPI report was highlighted in the last MPC meeting, where the committee was split, the hawks looking at near terms concern on food, energy and services prices, the majority acknowledging the weak economy, slack labour markets and growing output gap. Today’s numbers help the hawks, although the worst of their inflationary fears did not evolve. Services rose slightly but the root cause was holidays expenditure: airline prices jumping as school holidays started and hotels and restaurants, no doubt reflecting the same. The comment in the MPC report that even the Hawks think this is short term, has not received enough scrutiny.
“But a “Bad” inflation figure this morning does little to help long term rates, even though a cut by the MPC in November is very likely. These have been rising due to fears around the rising budget deficit, caused by growing government spending and slower growth, the latter a by-product of the MPC rate hikes two years ago. Finding new sources of taxation has been this summer’s holiday project for the Treasury. Whatever inflation, the MPC or the economy does will count for little to the bond market vigilantes until the books are balanced. If they are, in October, it would set the UK apart from other G7 economies and make the UK an attractive opportunity. If not, it’s more of the same.”
Scott Dawson, CEO of DECTA UK, said:
“The rise in UK inflation is a major concern, putting pressure on the Bank of England to reconsider the pace of interest rate cuts. The Bank of England has already raised its inflation forecast for the year and is predicting a peak of 4% in September.” For fintechs, this economic environment could mean a shift in investment strategy. In a post-cheap-credit era, venture capital is tightening, leading to a new focus on resilience over reckless risk. This means investors may favour innovations with a clear purpose and practical application over novelty for its own sake. Innovation for the sake of innovation, detached from purpose or regulation, often leads nowhere.”
“For SMEs, the rising costs, fuelled by higher taxes and minimum-wage hikes, are likely being passed on to consumers. This further erodes customer goodwill, which is crucial for businesses to thrive. If the “rot economy” reaches the payments industry, companies may be forced to cut services, be more conservative with their risk profile, avoid new technology, and raise prices to stay afloat. Ultimately, this risks creating a world where both merchants and consumers cannot trust the payments ecosystem.”
“Businesses can maintain trust in payments by prioritising transparency with customers, investing in secure and reliable payment technologies, and carefully managing pricing strategies to avoid sudden increases. By demonstrating stability and responsiveness, companies can reinforce confidence even in a challenging economic environment.”
Lindsay James, investment strategist at Quilter, said:
“The UK’s inflation redux continues apace, with the Consumer Prices Index rising to 3.8% in July, up from 3.6% in June. With the Bank of England now forecasting inflation to peak at 4%, before falling back, there is considerable pain yet to come for consumers at a time when economic weakness in the UK is becoming further exposed.
“July’s inflation reading is a noisy one, what with the summer holidays and activities having an impact on the monthly rate of change. Indeed, Oasis’ long-anticipated reunion tour will have bumped up hotel prices, while the timing of the school holidays has led to a significant increase in airfares, the largest July increase since the data collection for airfares moved to monthly.
“Services inflation continues to be a key factor in the overall rate and remains sticky, hitting 5%. Meanwhile, food prices continue to rise at a level higher than overall inflation as suppliers and supermarkets account for higher labour and regulatory costs following the increase in national insurance contributions and the national living wage. Uncertainty remains on what impact US trade policy will have on the cost of goods in the UK, but given tariffs are beginning to feed into the data globally, it is not likely to be helping the situation.
“As a result, the stagflationary environment facing the UK is getting further embedded. Growth, albeit better than expected, is back to being anaemic. The labour market is showing signs of strain, while bond yields are picking up again. The UK faces a moment of reckoning this Autumn when Rachel Reeves will be forced to consider either her fiscal rules or her pledges not to raise taxes for working people given the fiscal shortfall. Tax changes around the edges and lack of deeper spending cuts appears to simply not to satisfy markets any longer.
“All of this makes it incredibly difficult to predict the path of interest rates. The weak growth and fragile state of employment in the UK should enable the Bank of England to cut rates again at least once this year, but if inflation continues its march upwards and gets stuck at any point on the way back down, then policy decisions may need to be backtracked.”
Chris Beauchamp, Chief Market Analyst at investment platform IG, said:
“Following hard on the heels of surging gilt yields comes a fresh rise in UK inflation. While Westminster plots ways to squeeze more from UK taxpayers, it seems that household finances are facing further pressure as prices rise. But while the headline seems to make last month’s rate cut look misplaced, below the surface it seems several key components drove the rise, and a focus on the less volatile elements suggests that the picture is more nuanced. Inflation isn’t beaten, but it is perhaps being tamed.”
Sarah Pennells, Consumer Finance Specialist at Royal London, said:
“The rise in inflation will be concerning for those households who were only just starting to see improvements in their financial resilience, and worrying for some who continue to be squeezed by higher prices.
“Our latest research shows that almost one in five adults are overdrawn at the end of the month or have no money left. Housing remains the most pressing issue on budgets, with seven in ten private renters paying average increases of over £300 a month. Essentials like energy, food and housing continue to cost significantly more than they did for most people, with households telling us they were spending an extra £148 a month on food and £129 a month on energy, on average, compared to a year earlier.
“Half of UK adults still feel their savings have been weakened by the higher ongoing costs and bills, with one in five having less than £100 in savings.
“Those slipping into overdraft may already be struggling with high interest rates, and rising prices only add to the pressure. For those making modest financial progress, further inflation risks undoing that hard won stability.
“We’ve produced a range of information to help people save money more effectively, make a budget that works, and to cut bills and everyday expenses so their money goes further.”
Lucy Smith, Senior Investment Manager at Killik & Co said:
“The Bank of England is now likely to delay any cuts to interest rates as it remains wary of inflation becoming entrenched. Businesses will remain cautious and consumers will expect to see their household budgets stretched.
“The Bank of England recently pointed towards the lasting impact of the coronavirus pandemic and the Russia-Ukraine war as key drivers of inflation. However, new data from the ONS showed an upgraded economic outlook for the UK, and furthermore the previously published growth rate for 2023 has just been revised upwards. Additionally, given that more recently President Trump met both the Russian and Ukrainian presidents, there is an optimism about a potential resolution with the hope that some of these challenges could be mitigated. Data has also shown that employees’ average earnings have outpaced inflation at 5.0% up to June 2025, which should help consumers not feel the pinch of higher inflation.
“Consumers should continue to think about the long-term and focus on saving what they can, whilst considering their options when it comes to investing. It is important to consider the returns in real terms, rather than letting inflation erode the value over time.“
Phoebus Software’s chief sales and marketing officer, Richard Pike, said:
“Today’s rise in inflation adds weight to forecasts that price growth could reach 4% later this year, well above the Bank of England’s 2% target. This will, in turn, cast doubt on how quickly the Bank can move on interest rate reductions, with Governor Andrew Bailey recently warning that cuts must be made ‘gradually and carefully’. For borrowers, any delay to rate cuts means higher repayment pressures for longer, particularly for those on variable rates or coming to the end of fixed deals.
“The FCA’s recent move to ease affordability requirements may stimulate activity among prospective buyers and those remortgaging, but its true impact is yet to be felt. Many borrowers on existing deals will continue to face affordability challenges, particularly as fixed-rate terms expire. In this climate, agility is essential. Lenders that have the right technology to manage risk, respond to changing market sentiment, and deliver a seamless customer experience will be best placed to support brokers and borrowers through ongoing uncertainty.”
Tim Graf, Head of Macro Strategy, EMEA at State Street Markets, said:
“Inflation stickiness continues for another month, with early clues from our survey of online prices this month suggesting August may well see a continuation of this trend. With the Bank of England now divided on the need to ease further, their maintenance of a quarterly cadence for cuts faces significant challenges. It could be next year before we see another move.”
Mike Randall, CEO at Simply Asset Finance, said:
“Today’s rise in inflation will be unwelcome for many, signalling higher prices across supply chains and further tightening margins. This comes at a time when businesses are still grappling with April’s NI hike, and speculation looms around further cost increases in the Autumn Budget.
“While this could dishearten some SMEs, most remain optimistic and are waiting for the right moment to invest in growth. The Government now needs to recognise the untapped potential at its fingertips and focus on the missing piece: creating an environment that fosters entrepreneurialism, rewards risk-taking, and channels funding to the firms driving recovery.”
Daniel Austin, CEO and co-founder at ASK Partners, said:
“Today’s rise in UK inflation demonstrates how the balancing act between volatile global conditions, driven by Trump-era uncertainty and domestic policy shifts, is becoming harder to maintain. With the recent interest rate cut bringing the base rate to 4%, and analysts predicting two further rate cuts this year, many will be asking what this sticky inflation might mean for the Bank of England.
“For homeowners and buyers, hopes of lower borrowing costs remain following the recent rate cut, but persistently elevated fixed mortgage rates could delay any real relief. With forecasters expecting the UK’s 2% inflation target to remain unmet for the remainder of the year, homeowners look set to face continued mortgage cost pressures for some time.
“Investors and developers will also be watching closely. Appetite remains strong in resilient sectors like co-living, build-to-rent and storage, where supply constraints and healthy demand keep capital active. But a stable, downward inflation trajectory will be key. If these predicted BoE rate cuts do materialise, it could reignite activity. Meanwhile, there may be opportunity present for the most nimble of investors to capitalise on a potentially cooler market.”
David Morrison, Senior Market Analyst at FCA-regulated fintech and financial services provider, Trade Nation, said:
“UK inflation edged up in July 2025, with CPIH rising 4.2% (from 4.1% in June) and CPI rising 3.8% (from 3.6%). Monthly CPI rose 0.1%, while CPIH was flat. Transport, especially air fares, pushed rates higher, partly offset by housing costs. Core measures were broadly stable, with goods inflation picking up slightly and services inflation holding firm.
“The uptick in inflation comes after the Bank of England cut rates earlier this month. That’s an unfortunate look, although economists can argue that the rise in air fares may be a one-off. There was a swift market reaction to the data as traders started to price out the probability of further cuts in the near term. This saw sterling rally and FTSE 100 stock index futures fall.”
Jonathon Marchant, Fund Manager at Mattioli Woods, said:
“The latest UK CPI data showed inflation running at 3.8% year-on-year, marginally exceeding the 3.7% consensus forecast and marking an unwelcome surprise for policymakers. Notably, services inflation accelerated from 4.7% to 5.0%, while exceeding consensus at 4.8%. The latest figures underscore the challenging reality of an economy facing both slowing growth and persistent price pressures.
“With inflation moving further away from the Bank of England’s 2% target, the case for additional rate cuts in 2025 has weakened. The recent narrow vote on interest rates now appears prescient, suggesting policymakers may need to maintain a more hawkish stance despite economic headwinds. Today’s data suggests they may need to pause their easing cycle, prioritising price stability over growth support as the economy grapples with the twin threats of stagnation and persistent inflation.
“The spectre of stagflation looms over the UK economy. Last year’s Autumn Budget has continued to weigh on business confidence while imposing significant additional costs on employers, expenses that will likely filter through to consumers via higher prices.
“With this year’s Autumn Budget approaching, the Monetary Policy Committee may prefer to pause and assess the Budget’s consequences before implementing further rate reductions. This wait-and-see approach reflects the challenging balancing act between supporting growth and maintaining price stability in an increasingly complex economic environment.“
