The U.K.’s annual inflation rate was higher than expected at 3.8% in July, according to data released by the Office for National Statistics (ONS) on Wednesday. Most economists had anticipated inflation would reach 3.

The Bank of England currently expects inflation to hit 4% in September, the all-important month for pensioners. Wage growth is currently slightly higher than this at 4.6% (including bonuses), although it could shift slightly in next month's report.

Transport was the biggest factor driving up overall inflation in July, particularly due to a spike in flight prices as families booked summer holidays. | ITV National News

Higher food and airfare prices pushed U.K. inflation above expectations in July, official figures showed Wednesday, which has tempered market expectations that the Bank of England will cut interest rates again this year.

Prices in the UK rose by 3.8% in the year to July, driven mainly by a jump in the price of air fares and food. That means inflation is at its highest level since January 2024 and still far above the Bank of England's target of 2%,

Gilts broke out of a week-long slide on Wednesday, surging despite a hot inflation number that threatens to slow the pace of interest rate cuts by the Bank of England.