Tough on Inflation, Tough on Causes of Inflation?: UK Inflation Watch | Europe

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Tough on Inflation, Tough on Causes of Inflation?: UK Inflation Watch | Europe

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July 22, 2026 08:42 PM GMT

Morgan Stanley & Co. International plc+MUK Inflation Watch | Europe Bruna Skarica

Chief UK Economist

Tough on Inflation, Tough on Bruna.Skarica@morganstanley.comIzabel Dobreva +44 20 7425-9110

Equity Analyst

Izabel.Dobreva@morganstanley.com +44 20 7677-5006

Causes of Inflation? Jamie Rollo

Jamie.Rollo@morganstanley.com +44 20 7425-3281

UK inflation missed marginally, with soft underlying services Grace Smalley, CFA

inflation details. Inflation will rise in July, driven by higher utility EquityGrace.Smalley@morganstanley.comAnalyst +44 20 7425-9629

bills. Even with higher auto fuel prices in the months ahead, we Cedric Norest

still see headline inflation peaking at ~3.25%Y in 4Q26. In this ResearchCedric.Norest@morganstanley.comAssociate +44 20 7425-1462

note, we also discuss the latest newsflow on potential

regulatory and fiscal measures that could impact inflation. Our

main focus remains the decision on the NLW hike for 2027.

The 2026 Extel Global Fixed Income Survey is open (here). If you have enjoyed

reading our UK research, please rate us five stars in the European Economics Exhibit 1 : Our inflation forecasts: the peak in

category. Thanks for your readership and support! headline inflation this year still looks as likely to

be lower than in 2H25

If you would like to receive our monthly inflation forecasts in Excel format, please

click here. 12.0 CPI Inflation (%Y) & Component Contributions (pp) Forecast

10.0

What happened? Our initial take on the print is here. This is a print of interesting 8.0

dualities. Underlying services inflation declined by 20bp, in a broad-based move 6.0

lower. Travel categories were very strong, aided by a later index day.