According to The Office for National Statistics (ONS), the Consumer Prices Index (CPI) inflation rose from 2.6 per cent in June to 2.9 per cent in July.
Energy prices were increased by the war in the Middle East, with a 13 per cent hike in Ofgem’s energy price cap last month, and Francis says that is having a big impact on households.
“The reliable indicators of what is actually happening to household energy prices are the unit rates and standing charges and these latest predictions of yet further rises driven by the cost of gas will be deeply worrying to households up and down the country,” he said.
“We’re now seeing energy consumption decline. Some reduction could be seen as a good thing, caused by better energy efficiency in people’s homes.
“But sadly, for many households, reductions in energy use have happened simply because people cannot afford to use as much energy as in the past.
“That means that some are demonstrating dangerous behaviours such as cutting back on washing and for one in 10 members of the public, skipping hot meals to save on energy.
“Meanwhile all of this is set against a backdrop of energy firms posting in excess of £6 billion profits on their UK operations in 2026 alone.”
CMC Markets head of UK Chris Cheverall and Bryn Jones, head of fixed income at Rathbones Asset Management, are waiting to see whether energy costs feed into other areas.
Cheverall said: “The Bank can look through an energy shock for a period. However, the problem is if those higher costs start feeding into wages, business pricing and services inflation, because that is when a temporary shock becomes a more persistent one.”
Jones added: “The key question is whether higher energy costs ultimately feed through into wages and broader pricing behaviour. Given the weakness in the labour market, that pass-through may prove relatively limited.”
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