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Housing fuels UK inflation rise to 4.4% in July

by: IFAonline
  • 16/08/2011
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Housing fuels UK inflation rise to 4.4% in July
Price pressures across a number of areas forced UK CPI annual inflation up from 4.2% in June to 4.4% in July.

The Office for National Statistics (ONS) said price increases across the housing and housing services, goods and services, and clothing and footwear sectors were responsible for the increase.

Last month’s increase follows an unexpected easing of CPI in June, from 4.5% to 4.2%. RPI inflation was unchanged at 5% for the month.

Particular pressures came from rising mortgage arrangement fees, increases in housing rent – particularly for social housing – and the higher cost of home furnishings and textiles.

“The rise in inflation was primarily driven by a rise in core inflation from 2.8% to 3.1%, but we doubt this is a sign underlying price pressures are picking up,” said Samuel Tombs, UK economist at Capital Economics.

“Instead, the rise in core partly reflected the fact June’s figure was depressed by the earlier start to the high street summer sales this year.”

The figures has triggered a fresh letter from Bank of England governor Mervyn King to Chancellor George Osborne explaining why inflation remains more than one percentage point above the 2% target. King must write these letters every three months CPI inflation exceeds this threshold.

The Bank of England’s inflation report released last week said there was a “good chance” CPI would reach 5% later this year.

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