Inflation increased to 2.2% in July year-on-year, the first rise that the consumer price index (CPI) has seen in 2024.

The Office for National Statistics (ONS) revealed that on a monthly basis, inflation dropped by 0.2%.

Prior to this increase, inflation sat at the Bank of England’s target of 2% in June, which was the lowest it had been since July 2021, having hit highs of 11.1% in October 2022.

The ONS said that the largest upward contribution to the monthly change in CPI annual rates come from housing and household services, where prices of gas and electricity fell by less than they did last year.

Core CPI, which excludes energy, food, alcohol and tobacco, rose by 3.3% in the 12 months to July 2024, which is down from 3.5% in June.

Head of personal finance at Hargreaves Lansdown, Sarah Coles, said that this news will not be "massively welcome" for many, "especially for people hoping to be able to enjoy the new space in their budgets created by wage rises, but it’s not a huge upset either".

She added: "It’s likely to be business as usual at the Bank of England in September, with rates on hold, so it’s unlikely to alter the picture significantly for savers and borrowers.

"Energy bills fired up the engine of inflation this month. The energy price cap actually fell £122 in July, to £1,568. However, it’s a far less significant slide than the £426 cut a year earlier. Replacing a massive cut with a smaller one in the annual figures automatically helps to push inflation up."

The ONS said that the largest downward contribution came from hotels and restaurants, which fell by 0.4% month-on-month in July.

It said that this was due to the price of hotels, which dropped by 6.4% annually, compared with a rise of 8.2% a year previously.

Personal finance analyst at Bestinvest, Alice Haine, added that the latest services inflation data "remained stubbornly high" at 5.2%, though it was down on the 5.7% recorded in June.

Haine added: "Core inflation, which strips out the more volatile items such as food, alcohol and tobacco, edged down to 3.3% offering an indication that some of the stickier inflationary pressures are now starting to ease.

She went on to add that this increase in inflation is unlikely to bring around a consecutive cut to the Bank of England base rate next month.

Haine concluded: "Homeowners and first-time buyers hoping for a second rate cut sooner rather than later may be disheartened by the latest inflation reading, as it reduces the likelihood of a September reduction.

"Comfortingly, while mortgage rates remain high some major lenders have already rolled out cuts with the number of sub 4% home loans on the rise - offering glimmers of better times ahead. This may deliver the reassurance nervous buyers need to push ahead with a move whether to purchase a first home or upsize to a larger property."

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