While the Bank of England expects inflation to peak at 4% in the year to September, one economist has warned it could go higher.

Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, says in a statement: “These figures underscore the intensifying financial squeeze on households and businesses as a summer holiday spike in food and flight costs helped push inflation uncomfortably higher, despite July’s drop in energy bills.”

Thiru says “spiralling business costs” and higher food prices “may mean that inflation peaks higher than the Bank of England’s prediction of 4%”.

He adds that inflation should begin to slow in Autumn.

Rachel Flynn
Live reporter

It's been just over an hour since the Office for National Statistics released this month's inflation figures - which revealed a slightly higher than expected rise to 3.8% - so let's get you up to speed:

What does it mean?

The 3.8% rise in inflation over the 12 months to July this year is the largest increase in inflation since January 2024.

It is only slightly higher than the Bank of England's forecast for 3.76%, and inflation is expected to reach 4% in September before beginning to fall.

As a reminder, inflation measures the pace of price increases in goods and services over time. The main indicator of inflation is the Consumer Prices Index which is updated each month.

Why has it risen?

The ONS says the main driver of inflation was higher air fares, likely due to the timing of this year’s school holidays.

Meanwhile, the cost of food has continued to rise for the fourth month in a row, making the rate the highest it has been since February 2024. Beef, sugar, chocolate, instant coffee and fruit juices have seen sharp price rises since June 2025.

What does the government say?

Chancellor Rachel Reeves says there's "more to do to ease the cost of living," while shadow chancellor Mel Stride calls the figure "deeply worrying for families".

The government also says that rail fare cost rises for 2026 will not be confirmed today.

• Check out what this all means for your money, and you can also read our simple guide to inflation

Colletta Smith
Cost of living correspondent

The cost of almost everything we buy has been creeping up again over the last year, adding pressure on a government who promised to make life better for working families.

While nothing feels cheap right now, buying food is particularly painful - up 4.9% compared to last year - and because that’s not spending that people can easily cut back on, it hits households on lower incomes harder.

The same is true for petrol and diesel which was almost 3p a litre up compared to last year. That not only adds costs on all business, and pushes up prices all round, but is often a cost people need to spend to get to work, school, and appointments.

The cost of gas and electricity did fall a fraction at the start of July, but for most people any savings have been swallowed up by increasing bills elsewhere.

Peter Ruddick
Business reporter

Inflation – the way we measure the rising cost-of-living – is up. Again.

Some of this is statistical, but some of this will be causing real problems. One of the biggest issues for struggling households is the cost of food.

Food price inflation rose for the fourth month in a row. The rate is the highest it has been since February last year.

The main culprits? Beef, sugar, chocolate, instant coffee and fruit juices.

The reasons? There are lots of them. From the changing climate and taxes on businesses to trade problems not helped by the US President.

But these numbers show the impact will be significant on both the dining table and food businesses.

Image source, BBC News

BBC Breakfast presenter Ben Boulos explains what the 3.8% figure means for your money:

Simon Browning
Transport correspondent

For almost 30 years, regulated rail fares have risen in line with July’s Retail Price Index (RPI) inflation – being capped at 1% above or below RPI.

Last year, July 2024 RPI was 3.6%, so regulated rail fares rose by 4.5% in spring 2025, slightly under the cap of 4.6%.

But the government has told the BBC it will not confirm today how much fares will rise in 2026, or if July’s RPI figure will be used for the fare increase.

There have been two recent exceptions when the template was ignored and ministers stepped in to limit ticket price rises, in 2023 and 2024, due to economic periods of high inflation.

Last October, the chancellor revealed the price increases for regulated fares in 2025 during her first Budget.

We could expect to see a similar scenario this autumn, as the Treasury will currently be trying to balance the projected revenue needed to run the railways, versus the fare increases passengers need to pay to use them.

Image source, PA Media

We've also seen a statement from shadow chancellor Mel Stride, who blames the government for today’s slightly higher than expected result.

“This morning’s news that inflation has risen even higher than the 2% target is deeply worrying for families,” he says.

“Labour’s choices to tax jobs and ramp up borrowing are pushing up costs and stoking inflation – making everyday essentials more expensive.

"And with leading economists warning that the Chancellor has blown a colossal black hole in the public finances, families and businesses are bracing for yet more pain come the Autumn Budget.”

Inflation concerns lingerpublished at 07:20 British Summer Time

07:20 BST

Dharshini David
Deputy economics editor

Inflation was a touch higher than analysts expected last month, although in line with the Bank of England’s predictions.

There were some distortions - the rise in air fares was boosted as the collection day for data this year overlapped with the start of the school holidays in a way they didn’t last year.

But there are factors that will underpin concerns that inflation will take a while to get back down to the 2% target.

Those include the rise in food prices but also the persistence of inflation in services.

The Bank of England has recently highlighted that the rise in employers' staffing costs, due to increases in minimum wages and National Insurance are most likely playing a part.

And as inflation concerns linger, economists increasingly think we may not see another rate cut this year.

Image source, Reuters

We've just heard from Chancellor Rachel Reeves who says there is "more to do to ease the cost of living".

In a statement, she said: “We have taken the decisions needed to stabilise the public finances, and we’re a long way from the double-digit inflation we saw under the previous government, but there’s more to do to ease the cost of living.

"That’s why we’ve raised the minimum wage, extended the £3 bus fare cap, expanded free school meals to over half a million more children, and are rolling out free breakfast clubs for every child in the country.

"Through our Plan for Change we’re going further and faster to put more money in people's pockets.”

The 3.8% rise in inflation over the 12 months to July this year is the largest increase in inflation since January 2024.

It's worth noting that it's only slightly higher than the Bank of England's forecast for 3.76%, and inflation is expected to reach 4% in September before beginning to fall.

Image source, Getty Images

The ONS’s chief economist Grant Fitzner says the cost of food has continued to rise, “with items such as coffee, fresh orange juice, meat and chocolate seeing the biggest rises".

Inflation for food and non-alcoholic beverages was 4.9% in the year to July, up from 4.5% in the year to June, according to the ONS.

It’s the fourth consecutive increase in food inflation and the highest rate since February 2024.

Rachel Clun
Business reporter

Image source, Getty Images

Office for National Statistics (ONS) chief economist Grant Fitzner said the main driver of inflation was higher air fares, which experienced the largest July increase since the ONS began collecting that data on a monthly basis in 2001.

“This increase was likely due to the timing of this year’s school holidays,” he said.

It’s the highest rate of inflation since January 2024, when annual inflation was 4%.

Rachel Clun
Business reporter

Economists expected inflation to rise to 3.7%, though the Bank of England forecast for July inflation was 3.76%, slightly higher than consensus.

Inflation in the UK has risen to an unexpected 3.8%, the Office for National Statistics says.

We'll bring you more analysis and reaction on this shortly.

Colletta Smith
Cost of living correspondent

Graham Dutton owns 900 animals on his milk farm in Farndon, Cheshire, of which half are dairy cows.

He says he is facing cost pressures “on everything” including equipment and staffing.

“A big chunk of the money each month does go towards staff,” says Graham.

“There's not enough people that are willing to work on a farm, so if there are people willing then it's a struggle to tempt them come and work.”

Graham also grows maize to feed his animals but the drought has meant he has had to buy in fodder, which adds to his expenditure.

“Unfortunately that will mean for the next six months that prices will have to stay quite high to help counteract that,” he adds.

Colletta Smith
Cost of living correspondent

Yakub Lorgat, a father from Blackburn, says he has to make “certain sacrifices” financially in order to prioritise what is best for him and his family.

Currently, making sure his children have a “good time in the summer holidays is the most important thing” for him.

But that comes at a cost and in particular, spending money on eating out and on petrol are all adding to his struggles.

“The price of everything has gone up,” says Yakub. “It’s like [we’re] penny pinching in all areas.”

Tommy Lumby
Business data journalist

Prices across the UK economy rose at an estimated 3.6% in the year to June, the highest annual inflation rate for nearly a year and a half.

That was slightly more than some economists had predicted but was still well below the highs seen in late-2022, as the chart below shows.

Fuel prices were a big driver behind the increased rate in June, while food bills rose at their steepest pace since February 2024.

Rising food and fuel prices are “stretching” Michelle Birkenhead’s finances.

But she says budgeting has been the key to managing her money and planning ahead for social activities.

“It's so expensive,” says Michelle. “It's gone up so much, it's ridiculous. What used to cost us, two years ago, a weekly shop of £100, you're looking at £150.”

While most of Michelle’s living expenses have been increasing, she says she was relieved to find the cost of her car insurance has gone down.

Inflation measures the pace of price increases of goods or services over time.

A classic example is that if a bottle of milk costs £1 in July 2024 but costs £1.05 in July 2025, then annual inflation in milk is 5%.

It’s worth noting that if the rate of inflation slows, that doesn’t mean prices are falling; it means that prices are increasing at a slower rate.

Milk is only one thing bought by shoppers across the UK. The Office for National Statistics tracks the prices of hundreds of items – from regular supermarket goods, to fuel, to travel costs and home furnishings – to work out the overall rate of inflation.

That basket of goods is regularly updated to reflect shopping trends, as consumer preferences change.

The main measure of inflation is the Consumer Prices Index, which is updated each month.

Dharshini David
Deputy economics editor

It’s a far cry from the pace of price rises seen a couple of years ago, but inflation has resurged in recent months – and today we may learn it ticked up in July.

Global commodity prices have contributed to higher food and energy prices.

And analysis from the Bank of England and other economists suggests the government’s own policies – such as increases in minimum wages and National Insurance changes, which push up staffing costs – have added to price rises for food stuffs and kept inflation for some services, such as hospitality, from easing off.

Such factors, the Bank thinks, could see inflation hit 4% in the autumn – before subsiding again.

Again, it’s not the double-digit price rises of a couple of years ago but may be enough to prevent the Bank from cutting interest rates again this year.

A silver lining among all the inflation talk: earnings, including for those who’ve benefitted from those higher minimum wages, have been rising faster than prices, meaning the squeeze has eased for many, albeit slightly.