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UK inflation rises to 1.9% in June

by Danielle Levy on Jul 15, 2014 at 09:44

UK inflation rises to 1.9% in June

UK inflation accelerated to 1.9% in June, exceeding the expectations of many economists.

The figure was lifted by rising food and clothing prices and was up from 1.5% in May, according to the Office for National Statistics.

However, while the surprise increase may spark calls for interest rates to be risen sooner, Capital Economics' Samuel Tombs expects inflation to fall back over the summer.

'The rise in clothing inflation from -0.1% in May to 2.4% seems to have largely reflected the later start to the summer sales this year than last, so its annual inflation rate should ease soon,' he said.

'In addition, a further significant rise in food inflation from June’s 0% rate seems unlikely, given that global agricultural commodity prices have fallen in recent months and a price war between the supermarkets appears to be building.'

Tombs adds that the impact of sterling's appreciation over the last 12 months has not yet been fully felt, while falling utility bills could also see inflation fall to around 1% by the end of the year, giving the Bank of England more flexibility around when it chooses to rise rates. 

However, Markit chief economist Chris Williamson sounds a more hawkish note, pointing to surging house prices and falling unemployment. He said: 'With inflation almost hitting the Bank of England’s 2% target, the housing market booming, the economy growing strongly with no signs of momentum being lost and unemployment plummeting, the case for higher interest rates is building.'

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