UK | Inflation set to rebound sharply after July lull
July’s fall in inflation is likely to represent only brief respite for consumers. After a larger than expected rise in the energy price cap, we now expect CPI inflation to reach 3.5% before the end of the year.
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But while inflation is likely to move much higher in H2 2021, we expect the pickup to prove transitory and expect CPI inflation to return to 2% by end-2022.
CPI inflation slowed from 2.5% in June to 2.0% in July.
The ONS attributed almost half of the slowdown to strong base effects caused by a spike in prices last year when the economy reopened after lockdown.