UK inflation is to rise again, the first such increase for a long time, and one which is proving very difficult for the Bank of England to handle. Having held steady at the same level for two months running, experts are now saying that inflation will rise to 2.3% in July. This stands against the targeted 2% rate that the Bank of England expressed it wanted to keep the inflation rate at.

This is the latest in a slew of news in what has been a busy week for the British economy. Official figures will be announced Wednesday, which are expected to confirm this jump in inflation. It rose partly because the cost of travel—for example, flights, package holidays, and hotel stays—increased. That marks a big change from recent months when prices were steady.

The city-based economists have been watching it closely. Inflation rate is likely to go up to 2.3% from holding at 2 per cent in May and June. This could be the first increase in inflation since December 2023. Part of the increase reflects smaller falls in household energy costs this July than in the same month last year when energy prices were falling sharply.

Despite the slowing of price growth for services, it has remained very high. Service prices, among them travel and hotels, have continued to increase by over 5%. The rise is still driven by the higher selling prices for air fares, package holidays, and the like, as well as prices at hotels. For example, those at hotels have gone up quite a lot this year, partly due to new ways of traveling that have built up since the lockdowns for COVID-19 finished. They have also been increasing their rates during high demand, such as when popular artists like Taylor Swift and Pink are performing in the UK.

In fact, according to Rob Wood, chief economist at Pantheon Macroeconomics, the data may be a little skewed. Official surveys cover just about 100 hotels, and thus the prices of some hotels—for example, those in Wales when Pink was having a concert—might become unusually high. Still, Wood believes that part of the rise in the price of hotels is actual.

This surge in inflation comes off the back of last month’s move by the BOE to cut interest rates for the first time since the start of the COVID-19 pandemic, from 5.25% to 5%. The move aimed at providing relief to households with lower borrowing costs.

Inflation then was out of control, hitting 11.1% in October 2022, driven by the rise in energy prices following Russia’s invasion of Ukraine. Since then, it has come down, but the Bank of England believes it will climb again later this year to about 2.75%. It is perceived that it overshoots for a bit before coming down gradually to about 1.7% in two years and 1.5% by 2027.

It is also envisioned that the Bank of England base rate will be slashed to around 3.5% by the end of 2025. Still, Andrew Bailey warned that the Bank still has to tread with care on the pace and depth of cuts in borrowing costs amid residual pressure from inflation.

On top of the inflation news, the UK economy is actually forecast to continue its bounce back from the recent recession. Official figures for the three months up to the end of June are expected to reveal a growth rate for the second quarter of 0.7%, matching that of the first quarter.

The job market, however, might not be quite so resilient. Job market data will be released Tuesday, and this is expected to show that unemployment has increased and wage growth slows. A report from the Chartered Institute of Personnel and Development said expectations for wage growth in the coming year will be 3%, down from the 4% previous estimate for 2024.

While lower inflation may feed through to small pay increases, perceptions are relative to perceptions that pay is still failing to keep up with living costs a few years ago,” said James Cockett, a senior labor market economist at CIPD.

This week saw very crucial economic updates that gave insights on how the UK had fought its way through inflationary and economic recovery pressures. Inflation rise and changes in the jobs market reflect a continuing challenge for the economy at large and Bank of England.