Bitcoin News Today: Air Fares and Food Drive UK Inflation to 3.8%—Crypto Returns as a Volatile Hedge

The UK's inflation rate rose to 3.8% in July 2025, marking an increase from 3.6% in June, as reported by the Office for National Statistics (ONS) [2]. This figure exceeded market expectations of 3.7% and reflects a persistent upward trend in consumer prices, driven primarily by transport costs, particularly air fares, and food and beverage prices [1]. The rise in inflation was also influenced by the timing of school summer holidays, which affected air travel demand, and ongoing pressures in the housing and household services sector [2].

Transportation accounted for the largest upward contribution to the monthly change in the Consumer Prices Index (CPI), with air fares surging by 30.2% from June to July 2025, compared to a 13.3% increase during the same period in 2024 [2]. Motor fuel prices also played a role, with petrol and diesel prices rising by 2.0 and 2.9 pence per litre, respectively, although these remained lower than a year earlier. Food and non-alcoholic beverages inflation hit 4.9% in July, a significant rise from 4.5% in June, with beef, orange juice, coffee, and chocolate among the most affected categories [3]. The increase was exacerbated by supply chain disruptions due to droughts in key European fruit and vegetable-producing countries [3].

The persistence of inflationary pressures has led to speculation that the Bank of England's Monetary Policy Committee (MPC) may delay further interest rate cuts. James Sproule, chief U.K. economist at Handelsbanken, noted that services inflation, a critical component of the U.K. economy, remains "sticky," reducing the likelihood of a rate cut in November 2025 [1]. The MPC had previously lowered interest rates to 4% in early 2025, but several members voted to maintain the status quo until inflation trends became clearer [3]. Analysts from the National Institute of Economic and Social Research (Niesr) suggested that while inflation is expected to decline in the second half of 2025, the Bank of England may remain cautious due to risks from sustained wage pressures and ongoing food price inflation [3].

In parallel, discussions around the potential return of bitcoin (BTC) exchange-traded notes (ETNs) in the U.K. highlight growing investor interest in digital assets as a hedge against inflation [4]. The Financial Conduct Authority (FCA) is set to reintroduce these products on October 8, 2025, following a four-year ban imposed in 2021 over concerns regarding volatility and valuation challenges [4]. This development could position the U.K. to catch up with U.S. and European markets, where crypto-linked investment products have gained traction. Industry observers argue that the reintroduction of BTC ETNs may enhance London's status as a global financial hub and provide retail investors with regulated exposure to cryptocurrencies [4].

The reintroduction of BTC ETNs comes amid broader economic uncertainty, with inflationary pressures in the U.K. economy expected to remain above the Bank of England’s 2% target for the foreseeable future [3]. While digital assets like BTC and Ethereum (ETH) are often cited as potential inflation hedges, their high volatility presents significant risks to investors [4]. BTC, with its capped supply of 21 million coins, is considered more deflationary and stable compared to ETH, which introduced a token-burning mechanism in 2021 to offset its inflationary supply model [4]. Despite these features, experts argue that gold and equities remain more reliable as long-term hedges against inflation [4].

The interplay between macroeconomic trends and financial market innovations underscores the complexity of managing inflation in a rapidly evolving economic landscape. As the U.K. navigates rising inflation and the return of crypto-related investment products, the path forward will likely involve a delicate balance between fiscal policy, monetary control, and investor demand for alternative assets.

Source:

[1] UK inflation picks up to hotter-than-expected 3.8% in July (https://www.cnbc.com/2025/08/20/uk-inflation-in-july-2025.html)

[2] Consumer price inflation, UK: July 2025 (https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/july2025)

[3] UK inflation rises by more than expected to 3.8% amid ... (https://www.theguardian.com/business/2025/aug/20/inflation-rises-july-pause-interest-rate-cuts)

[4] UK Bitcoin ETNs Could Be a Bigger Deal Than People Expect (https://finance.yahoo.com/news/uk-bitcoin-etns-could-bigger-070000197.html)