While a post-pandemic burst of inflation has abated across much of the developed world, the UK is still stuck with the highest price growth among big Western economies.

UK inflation rose unexpectedly in July, led by energy and airfares, but core pressures remain nuanced. Markets signal BoE may pause in September.

The U.K.’s annual inflation rate was higher than expected at 3.8% in July, according to data released by the Office for National Statistics (ONS) on Wednesday. Most economists had anticipated inflation would reach 3.

British inflation hit its highest in 18 months in July when it increased to 3.8% from 3.6%, official data showed on Wednesday, once again leaving the country with the fastest rate of price increases among the world's largest rich economies.

Higher food and airfare prices pushed U.K. inflation above expectations in July. The development has tempered market expectations that the Bank of England will cut interest rates again this year.

The Bank of England currently expects inflation to hit 4% in September, the all-important month for pensioners. Wage growth is currently slightly higher than this at 4.6% (including bonuses), although it could shift slightly in next month's report.

UK inflation rose to 3.8 per cent in July, up from 3.6 per cent in June, keeping the rate stuck at its highest level since January. The rise in Consumer Prices Index (CPI) was also higher than economists had anticipated, who had forecasted 3.7 per cent.

Gilts broke out of a week-long slide on Wednesday, surging despite a hot inflation number that threatens to slow the pace of interest rate cuts by the Bank of England.