UK CPI rose 0.1% MoM in July and accelerated to 3.8% YoY (from 3.6% YoY in June), surprising to the upside and reaching its highest rate since January 2024.

• Core CPI increased 0.2% MoM and 3.8% YoY (up from 3.7% YoY), driven largely by stronger services prices, which rose 0.7% MoM and 5.0% YoY.

• Energy prices turned positive for the first time since June 2023, up 1.4% YoY, helped by base effects and a 2.0% MoM jump in fuel prices.

• Food and non-alcoholic beverages rose 0.2% MoM and 4.9% YoY, contributing 0.55 ppts to headline inflation — the highest contribution since January.

• Within core services, airfares surged 30.2% MoM, lifting the transport contribution to 0.44 ppts, while restaurants & hotels rose 0.4% MoM, pushing that segment’s annual rate to 3.4% YoY.

• Markets initially reacted hawkishly (higher yields and stronger GBP), but later pared back as investors viewed much of the upside as driven by volatile components.