The July CPI measurement is above our forecast of a 0.2% MoM rise in the index. Analysts had expected the CPI to rise by 0.2-0.3% during the month. The main difference between our forecast and SI’s measurement stems from airfares, which rose far more than we had anticipated, for the second month running. Other CPI subcomponents developed fairly favourably, and in line with expectations. For example, the protracted rise in food and beverage prices has petered out for now, as we had projected.

Seasonal surge in airfares

As is typical for July, airfares rose sharply, driven by the peak season for inward and outward tourism and travel. On the other hand, this month’s increase was larger than we had anticipated, for the second month in a row. International airfares proved to be the single strongest driver of the rise in the CPI, surging by 19.9% (0.48% CPI effect). In all, the travel and transport component rose 2.93% (0.47%), owing almost entirely to the spike in airfares, as motor vehicle prices fell 0.16% (-0.01%) and fuel prices were virtually flat between months. We expect the jump in airfares to start reversing again in August, as it usually does.

Seasonal sales pack their usual punch

Summer sales were in their usual place, pulling various prices markedly downwards between months. The main downward impact on the CPI came from clothing and footwear prices, which fell by 4.85% (-0.18%) during the month. Next in line were furniture and housewares prices, which declined by 2.16% (-0.10%). Summer sales provide only transitory relief, however, as they wind down fairly quickly, and we expect them to come to an end in August and September this year.

No news is good news?

Other CPI subcomponents generated little in the way of news, particularly the items that affect inflation movements most strongly – but that in itself can be characterised as newsworthy. The all-caps headline in this area goes to food and beverage prices and imputed rent. The price of food and beverages was all but unchanged month-on-month and made no impact on the CPI, whereas we had assumed a 0.3% increase (0.05% CPI effect). We had previously observed that the steady upward march in food prices seen in H1 could soon run out of steam, and the July measurement suggests, all else being equal, that this will indeed prove to be the case. As we see it, the effects of contractual pay hikes have already come largely to the fore.

Imputed rent rose by 0.27% MoM (0.05%), noticeably below our forecast of a 0.5% increase (0.10%). The last time the contribution of imputed rent to the MoM rise in the CPI was smaller than this was in January 2025, when it declined by 0.2%.

The near-term outlook

Inflation can be assumed to gain momentum in the autumn, when one-off items such as last year’s cancellation of university fees and full subsidy of primary school meals drop out of twelve-month measurements. We project that headline inflation will measure 4.6% in October. Our preliminary forecast is as follows:

• August: CPI to rise 0.2% (twelve-month inflation 4.1%) – End-of-sale effects kick in, while airfares start falling. The cancellation of university fees drops out of twelve-month measurements.
• September: CPI to rise 0.2% (twelve-month inflation 4.6%) – Continued end-of-sale effects, mitigated by a sizeable drop in airfares. Various price hikes due to fee schedule revisions. Free primary school meals drop out of twelve-month measurements.
• October: CPI to rise 0.3% (twelve-month inflation 4.6%) – Seasonal effects have tapered off. Most items pull in the same direction, increasing marginally. Headline inflation holds unchanged from the previous month.

The July inflation measurement is the last one on the docket before the Central Bank Monetary Policy Committee’s next meeting. Therefore, a policy rate cut in August is all but off the table.