Annual inflation rose to 2.3% in July, the highest rate since the Office of National Statistics (ONS) started tracking it in 1997, it was revealed today.
The largest upward effect on the Consumer Price Index (CPI) annual rate came from transport, with petrol pump prices rising this year, reflecting movements in crude oil prices, compared with falls a year ago. There were also upward contributions from air and sea travel, says the ONS.
Meanwhile the Retail Price Index (RPI) inflation rate remained unchanged in July. Upward influences were similar to those for the CPI but there were additional downward influences from housing components excluded from the CPI. Mortgage interest payments showed a larger increase a year ago following last June’s quarter point rise in the repo rate. A further large downward effect came from depreciation costs as house prices used in their calculation rose by less than last year.
Last week the Bank of England said inflation costs would rise above the government's target of 2% in coming months, before easing off.
The Bank added CPI inflation was then expected to rise above the 2% level before the end of the two-year forecast period.
The latest figures have cast doubt over the possibility of further interest rate cuts as consumer spending seems not to have been declining as badly as was first thought.
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