The Consumer Prices Index (CPI) measure of inflation rose to 0.1% last month, the Office for Nationals Statistics (ONS) has said.
Adam Chester head of economic research & market strategy at Lloyds Bank Commercial Banking, said: “This morning’s UK CPI numbers defied expectations that plummeting oil prices and a strong pound could push headline inflation back into negative territory in July.
“While the headline rate of inflation ticked up from 0.0% to 0.1%, the “core” rate jumped from 0.8% to 1.2% – its highest for five months. The stronger-than expected outturn was largely due to stronger contributions from education, restaurants and hotels, and clothing and footwear – with the latter reflecting less aggressive summer discounting.
The surprise rise, especially in the core rate, has led to a knee-jerk spike higher in the pound. and reaffirmed market expectations that UK interest rates could rise in the first half of 2016.”
“The pound is currently trading nearly a cent higher against both the euro and US dollar, at around 1.4150 and 1.5650, respectively.
“While the Bank of England is unlikely to read too much into one month’s data, the pickup in the core rate is a timely reminder that not all indicators of inflation are pointing south.”