Inflation in the UK rose to 2.2% in July, above the central bank’s 2% target, the Office for National Statistics said on August 14.

The inflation figure released by the Office for National Statistics was lower than the headline consumer price index (CPI) forecast of 2.3% in July, which economists had told Reuters earlier.

UK headline inflation hit 2% in May and June, in line with the Bank of England’s target.

The Office for National Statistics said July inflation rose due to the price of housing and household services, while gas and electricity prices both fell less than a year earlier.

On the other hand, the core CPI (excluding food, energy, alcohol and tobacco prices) rose 3.3% in July, lower than the estimated increase of 3.5%, the UK Office for National Statistics said.

Notably, service sector prices, which are closely watched by the Bank of England, fell to 5.2% in July, from 5.7% the previous month.

Earlier, official figures showed that average wages excluding bonuses in the UK rose by 5.4% in the second quarter of 2024, compared to the same period a year earlier, marking a two-year low. The unemployment rate in the country fell to 4.2% in the second quarter, from 4.4% in the March-May period.

Earlier this month, the Bank of England announced its first interest rate cut in more than four years, taking the benchmark bank rate to 5%. The monetary authority had previously pegged the rate at a 16-year high of 5.25%, effective from August 2023.

In its monetary policy report published earlier this month, the Bank of England forecast that CPI would rise again in the second half of this year.

There is still uncertainty about when the Bank of England will cut interest rates again, and whether there will be another cut this year. The Bank of England’s Monetary Policy Committee is scheduled to meet three more times over the rest of the year.

Following the July inflation data, markets are pricing in a 55% chance that the Bank of England will keep interest rates on hold in September, while the odds of a rate cut next month have only increased slightly, according to data from London-based brokerage LSEG . On the other hand, expectations of a rate cut in November have risen to more than 90%.