The Office for National Statistics said CPI inflation rose to 3.8% in July from 3.6% in June. The figure kept the headline rate at its highest since January 2024. Transport was the main driver, with air fares up 30.2% between June and July, the largest monthly rise since monthly data began in 2001. Petrol rose by 2p per litre and diesel by 2.9p over the period, while prices in restaurants and hotels also rose as overnight stays were booked.

Most economists had expected a smaller rise. The ONS said the increase was driven largely by air fares, linked to this year’s school holidays. Food price inflation rose to 4.9% in July, and petrol and diesel prices were higher than a year earlier. The Bank of England expects CPI to peak around 4% in September before easing.

CPI including owner occupiers’ housing (CPIH) rose to 4.2% in July from 4.1% in June. The Retail Prices Index inflation rose to 4.8% from 4.4% in June, a figure used to set regulated train fares in England next year. Chancellor Rachel Reeves said there is more to do to ease the cost of living and cited policies such as raising the minimum wage, extending the £3 bus fare cap, expanding free school meals and introducing free breakfast clubs for every child.