UK inflation climbed to 3.8% in July, the highest in 18 months, up from 3.6% in June and above expectations. The jump was driven by a sharp 30% rise in airfares due to summer holiday demand, alongside higher petrol and food prices. Food inflation rose to 4.9%, pushed up by poor harvests in southern Europe. Services inflation, a key Bank of England (BoE) measure, also rose to 5%, reinforcing price pressures. The BoE recently cut interest rates to 4% but markets now expect no further cuts this year, with a move not fully priced in until spring 2026. The pound held steady following the release as investors reassessed the interest rate outlook.