JUST IN: Households frustrated as Inflation holds at 3.8% despite wage growth

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Analysts were unsurprised by the latest figures released this morning, but the data highlights the frustration felt by many households. While wages for many workers have been rising faster than inflation, people are still finding that their money does not stretch as far as expected.

The impact is especially harsh on low-income earners, with the resurgence of inflation being driven largely by the rising cost of staple products. Homeowners and landlords are also anxious, hoping that long-awaited interest rate cuts might arrive later this year.

Much of the recent inflation spike has been fueled by global commodity prices—particularly energy and food. However, those pressures are now beginning to ease.

Another factor pushing food inflation higher than rates in Europe is government policy. Economists, including the Bank of England, suggest that higher National Insurance Contributions and an increase in minimum wages have added more than 1% to food prices while intensifying cost pressures across other sectors. These impacts are expected to fade, but concerns remain about what could follow.

The boss of Aldi has already cautioned that “more price rises may loom, depending on Budget measures.” Meanwhile, the government insists that the upcoming Budget “will help to ease the cost of living pressures on consumers and businesses” but has not yet revealed the specifics.

Despite inflation holding steady at 3.8% in July, food prices continued to climb at a sharper pace, according to detailed consumer price inflation tables released by the ONS.

James Smith, who covers the UK economy for the investment bank ING, shared his reaction on BBC Radio 4’s Today programme. “It is certainly not good news for the Bank of England,” he said. “3.8% is well above their target and of course the prospect of further interest rate cuts hang in the balance.”

Commenting further on rising food costs, he added: “Over the last few months, if you think about what is a big input for supermarket prices – it is wage costs. We have seen those tax rises come through, the big rise in national living wage as well. I think that is filtering through to what we are seeing in restaurant prices too.

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