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19 August 2026 · United KingdomReal exampleDeep Dive15-marker25-marker

UK CPI inflation rises to 2.9% in July 2026

UK CPI inflation rose to 2.9% in the 12 months to July 2026 from 2.6% in June, while CPIH rose to 3.1%. The release is useful for analysing real incomes, the Bank of England’s policy trade-off and the distinction between headline and underlying inflation.

Chain

Higher inflation → faster rise in the price level → lower real purchasing power and greater pressure on monetary policy → consumption, investment and aggregate demand may weaken

Evaluation

The economic effect depends on the source and persistence of inflation: a temporary supply shock has different implications from broad, demand-driven inflation, while wages and expectations determine the effect on real incomes.

Diagram

AD/AS diagram chosen according to whether inflation pressure is demand-pull or cost-push

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30 July 2026 · United KingdomReal exampleDeep Dive15-marker25-marker

Bank of England holds Bank Rate at 3.75%

The Bank of England kept Bank Rate at 3.75% in July 2026. Three MPC members preferred an increase to 4.0%, showing how policymakers were balancing persistent inflation risks against signs of weaker demand.

Chain

Higher or unchanged restrictive interest rates → borrowing remains expensive and saving relatively attractive → consumption and investment weaken → AD growth slows → inflation pressure may ease

Evaluation

Monetary policy is less powerful when households and firms are insensitive to rates, and its effects arrive with long lags; the appropriate stance also depends on whether inflation is demand-driven or supply-driven.

Diagram

AD/AS diagram showing restrictive interest rates limiting aggregate demand

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Practice

Apply the evidence yourself

Use a real example to practise the chain, evaluation and judgement instead of memorising a model essay.

15-marker

Evaluate the view that a rise in inflation will necessarily reduce economic growth in the UK.

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15-marker

Evaluate the effectiveness of higher interest rates as a policy for reducing inflation in the UK.

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