Inflation rises in July

THE headline rate of inflation rose to 2.6% in July, according to new figures released this morning.

The surprise rise in CPI inflation, from 2.4% in June, will raise fresh questions about forecasts that it is on track to return to the Bank of England’s 2% target.

It could also limit the room of manoeuvre on the part of the Bank’s Monetary Policy Committee as it considers further action to stimulate growth.

A 1% increase in transport costs was the biggest single factor behind the rise in the CPI rate according to the Office of National Stastics.

The broader RPI measure of inflation increased to 3.2% in July from 2.8%.

Coverage of the inflation figures is brought to readers of TheBusinessDesk.com in association with stockbrokers Redmayne-Bentley.

Phillip Wong, from Redmayne-Bentley, said: “Economists were surprised to see UK inflation unexpectedly rise for the month of July as higher airfares and clothing pushed CPI to 2.6% and marked only the second time since the CPI measurement was introduced that the index has risen between June and July.

“Last week, Bank of England governor Sir Mervyn King cut growth forecasts to 0%. Even for the UK economy to remain flat, it is increasingly likely that further monetary injections will be needed from the central bank. However, today’s figures may delay this course of action further into the year.” 

CPI inflation hit a peak of 5.2% in September last year but has been on a downward path since, ticking up slightly in March before resuming course.