Rail fares in England on track to rise by as much as 5.8% next year as inflation accelerates more than expected – business live

Higher air fares, petrol and food prices push inflation to 3.8%, highest since early 2024; US tech stocks sell off amid warnings over future of AI boomSome economists now expect interest rates to be on hold this year, while the EY Item Club forecasting group says November is a ‘close call’.Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said:All told, July’s consumer prices report showed headline inflation matching the monetary policy committee’s (MPC) forecasts, as outlined in the August monetary policy report (MPR).Services inflation exceeded the MPC’s expectations, but that jump in services consumer prices index (CPI) was partly driven by a sharp move in the erratic airfares component, which could unwind in August’s data. That said, the doves on the MPC have taken a battering over the past week. July’s figures show sticky underlying services inflation and are another blow to those on the MPC that argued hard at the August meeting about the disinflationary process being underway.Base effects mean CPI inflation is likely to edge up further over the next couple of months and peak in September. Subsequently, inflation should cool gradually. The positive contribution from the energy category is expected to fade towards the end of this year and into next. Meanwhile, food price inflation should slowly cool, as the impact of stronger sterling gradually feeds through. Though services inflation is likely to remain sticky in the near-term, it will start to soften next year, as pay growth continues to cool and the impact of businesses passing on this year’s increase in employers’ National Insurance Contributions (NICs) fades.In the minutes of its August meeting, the MPC sent a clear message that inflation was its priority again. However, there wasn’t much in today’s release that should add to the committee’s concerns, with headline inflation in line with the Bank of England’s staff projections and its measure of underlying services inflation softening. November’s meeting will be a close call, with the hawkish shift at the August meeting leaving much greater uncertainty around the timing of the MPC’s next cut.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.Once again, the soaring cost of basic essentials like food and water is pushing families to the brink. Workers and their families are struggling to pay excessive bills. Pressure needs to be taken off family budgets by giving workers a pay rise. The time for action is now. Continue reading...

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