Investing News: Inflation Rose to 2.9% in July

Two ONS releases landed on consecutive days this week and they point in opposite directions, which is exactly the problem facing the Bank of England before its next decision on 17 September. Inflation went back up, and the labour market kept cooling.

CPI rose to 2.9% in July, driven by the energy cap

The ONS published July’s consumer price inflation figures on 19 August. CPI rose 2.9 per cent in the 12 months to July 2026, up from 2.6 per cent in June. CPIH, the measure that includes owner occupiers’ housing costs, rose 3.1 per cent, up from 2.8 per cent. Core inflation, which strips out energy, food, alcohol and tobacco, was unchanged at 2.6 per cent.

The largest upward contribution came from housing and household services, and the ONS attributes it directly to higher gas and electricity prices following the Ofgem price cap adjustment in July 2026. The biggest offsetting move came from transport, where motor fuel prices fell, with diesel down 8.8 pence a litre between June and July.

That split is the useful part for an investor. A headline number pushed up by a one-off administered price change, while core sits still, is a different signal from broad-based price pressure. It also means the same arithmetic reverses in a year unless energy rises again. What it does not change is the practical point: any cash returning less than 2.9 per cent is losing purchasing power while it sits there, and that is a decision about your emergency fund and your short-term money, not a reason to touch a long-term portfolio. Our cash ISA versus stocks and shares ISA comparison covers where that line sits, and compound interest and investing covers what a couple of points of real return does over a decade. The bulletin is at the ONS.

Payrolled employment fell 78,000 over the year

The day before, on 18 August, the ONS published its monthly labour market overview. The unemployment rate for people aged 16 and over was 4.9 per cent in April to June 2026, up 0.2 percentage points on the year. Payrolled employees fell by 78,000, or 0.3 per cent, between June 2025 and June 2026, and the early estimate for July showed a fall of 94,000 on the year. Annual growth in regular pay, excluding bonuses, was 3.5 per cent, with total pay including bonuses up 4.1 per cent.

Set that against the inflation release and you can see why the MPC held at 3.75 per cent in July with a 6 to 3 majority, and why the September meeting is genuinely open. Pay growth at 3.5 per cent against CPI at 2.9 per cent leaves a real increase, but a shrinking payroll is the thing that usually turns rate-setters cautious.

The investing response to this is deliberately boring: none. Neither number tells you anything about the next ten years of returns, and adjusting a portfolio around a single month of labour data is how people end up buying high and selling low. The ONS itself flags ongoing quality issues with its labour market sources and recommends looking at long term movements rather than short term wobbles, which is decent portfolio advice by accident. If you feel the urge to act on a data release, common investing mistakes is the more useful read, and lump sum versus pound cost averaging covers the decision people actually get wrong. The bulletin is at the ONS.