Inflation rises 0.1%
There has been a surprise increase in inflation in the UK, according to the latest figures from the Office for National Statistics.
The official figures show that the underlying rate of inflation, excluding mortgages, rose by 0.1% in July to stand at 2.9%.
The largest upward effect on inflation came from clothing and footwear and especially women’s outerwear. The ONS argued that summer sales were not as great as they were last year which also pushed inflation up.
The figures also cited the rise in fares and other travel costs for the surprise increase. This was due to a specific index for air fares, and its associated seasonal increase in fares, which were included for the first time this year.
The harmonised index of consumer prices (HCIP), which is the measure of inflation that the Government will be moving to next year, also showed an increase. In July HCIP increased from 1.1% to 1.3%.
The underlying rate of inflation has stood above the Government’s target of 2.5% for nine consecutive months prompting analysts to believe that the next interest rate move by the Bank of England will be up.
The Bank’s Monetary Policy Committee (MPC) held off changing interest rates from their 48-year low of 3.5% until the forecast for the economy became clearer.
The Centre for Economic and Business Research (CEBR) says that the new index of air fares could be freak figure affected by the recent strikes at British Airways. The CEBR also argues that most of the upward pressures on inflation are seasonal and will abate by the end of summer.
However, most analysts believe that any chances of an early rate cut are receding. The CEBR believes that the next interest rate move will be down, but this will come later in the year, possibly in the New Year.
