Bank of England sweats over ‘Oasis’ inflation

The Bank of England could come under further pressure to delay interest rate cuts this week with figures expected to show a rise in inflation – partly thanks to an ‘Oasis bump’.

Economists believe official Office for National Statistics (ONS) data published on Wednesday will show the cost of living squeeze deepened last month.

Consumer price index (CPI) inflation rose to 3.6 per cent in June, the highest level since the start of 2024. Experts believe it may have climbed to 3.8 per cent in July.

The Bank has warned that inflation is on course to rise to 4 per cent later this year – double its 2 per cent target.

Among the factors likely to have pushed up inflation in July is an ‘Oasis bump’ as hotel prices surged near venues for the band’s sold-out comeback tour.

Tours by Taylor Swift and Beyonce have previously been blamed for having a similar effect on inflation. Experts also pointed to higher airfares and the continued increase in the cost of food as putting upward pressure on this July prices.

Sanjay Raja, senior economist at Deutsche Bank, said: ‘July inflation will likely see price momentum rise further into uncomfortable territory.’

The Bank has been steadily cutting interest rates since last summer after inflation fell to around 2 per cent – bringing to an end a period of dizzying price rises.

But now inflation is rising again and markets have reduced bets on the likelihood that there will be any further rate cuts later this year – with the chances of a reduction before 2026 seen as little better than 50/50.

Official unemployment figures and GDP data published last week – which was slightly less grim than forecast by experts – have also cast doubt on the need for further moves. A halt in the progress of rate cuts would represent a blow for borrowers. Raja predicts this week’s CPI figure at 3.8 per cent. He said Deutsche’s own data suggested the ‘Oasis bump’ may have helped lift hotel prices by 9 per cent.

Bruna Skarica at Morgan Stanley predicts July inflation will climb to 3.7 per cent due to food, fuel and energy prices – but said factors including the Oasis impact meaning that risks are ‘skewed to the upside’.

Skarica said that even a marginally higher than expected inflation reading would pose ‘severe’ risks to Morgan Stanley’s expectation for an interest rate cut in November.

The cost of living squeeze is causing increasing stress for households, with millions more worried about it than when Labour came to power.

ONS data last week showed 59 per cent said that their cost of living has increased in the past month, up from 45 per cent a year ago.

The most common reasons for the rise were food, energy bills and fuel.