THE UK inflation rate hit its highest level in almost two years in July, suggesting that the sharp fall in sterling following the UK referendum to leave the European Union is forcing prices up.
Inflation was pushed up by a rise in fuel, alcohol, and accommodation costs, the statistics office reported on Tuesday.
The Office for National Statistics said the Consumer Prices Index (CPI) rose by 0.6% in the year to July 2016, compared with a 0.5% rise a month earlier. A smaller fall in the price of food than a year ago also pushed up prices.
The value of sterling jumped this morning on the back of the news that inflation was growing at its fastest rate since November 2014, rising to 1.153 euros against the euro in morning trading.
The ONS said although the slight rate rise between June and June is the highest seen since November 2014, it is still relatively low in an historic context.
The weaker pound is to blame for forcing up the price of fuel, food and drink and other imports. Higher input prices due to the weaker pound are likely to affect companies but for now there is no immediate impact from the UK’s decision to leave the European Union, the ONS said.
Upward pressures were partially offset by falls in social housing rent, and falling prices for certain games and toys, the ONS said.