By Max Clarke
The consumer prices index of inflation, or CPI inflation, climbed 0.2% over June to reach 4.4%.
The figure yet again marks a month with inflation far above the Bank of England’s Monetary Policy Committee’s 2% target. At a time of rising prices and constrained wage growth, disposable income remains severely squeezed. This is having a negative effect on consumer confidence, which nears rock bottom, adding greatly to retail decline across the UK.
Upwards pressure came from price rises across the board, notably from financial services and mortgage fees. Furniture, clothing and textiles and housing goods all contributed, as did rises in rent from private and social landlords.
Food inflation eased off, adding mild downwards pressure to the figure. Spikes in the price of wheat and other staples had seen food prices climb 5% in a month, though upwards pressure is now easing off.
Rick Roache, senior dealer at World First currency traders anticipates the rise may see the Bank of England hasten their interest rate rise in a bid to curb inflation. Currently businesses are not expecting the figure to rise until 2013.
“This will support the pound slightly as it may bring forward interest rate expectations which are currently not pricing in a hike until 2013,” said Roache.
Roache also noted: “This will largely be blamed on the spectacularly turbulent market conditions which we saw last week, and any consequent forecasting for the UK’s economy must now take these factors into account."
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