UK inflation hits 3.8% in July
interactive investor’s personal finance expert explains what this means for your money.
20th August 2025 09:01
- Inflation hits 3.8% in July, coming into hotter than expected, and reaching its highest level since January 2024
- The rise was largely driven by rising transport costs, notably spiky air fares due to summer demand. Food price increases have also remained stubborn
- Crucial for savers to act, particularly after interest rates were cut earlier this month.
Craig Rickman, Personal Finance Expert at interactive investor, says: “The news that inflation has hit its highest level since January 2024 will come as a blow to households still trying to find breathing space. While the increase in everyday costs like groceries and fuel is the immediate concern, inflation is slowly chipping away at the value of people’s savings in the long term as well. Now more than ever, it’s key to be switched on with your finances, especially as inflation is expected to continue accelerating over the short term.
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“After interest rates were cut earlier this month, there’s a greater risk that your savings could be eroded in ‘real terms’. That’s because if the interest rate you earn is lower than the speed of price rises, the buying power of your money will reduce. Over lengthy periods this can have a devastating impact on your finances, so now is the time to check whether your savings are earning a decent return, taking the time to shop around to find a better deal if necessary.
“This is also a timely juncture to review your long-term investment strategy, such as your ISA and pension - including any workplace savings - and ask yourself whether your approach is built to flex with uncertainty, not crack under pressure. A key task is to make sure the investments you’ve chosen aim to beat inflation over time.
“Unless something changes dramatically over the coming weeks, it seems inevitable that the Bank of England will continue its cautious approach to loosening monetary policy and keep interest rates on hold when policymakers announce their next decision on 18 September.”
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