By Jonathan Davies

The rate of inflation in the UK rose to 0.1% in July, according to the Office of National Statistics (ONS).

Most economists did not expect the consumer prices index (CPI) to rise from 0%, where it stood in June.

Excluding fuel, food, alcohol and tobacco, inflation rise 1.2%.

Inflation as measured by the retail prices index (RPI) remained at 1%.

Jeremy Cook, chief economist at the international payments company,, said: "“Inflation is positive in the UK, and positive for the UK. A period of ultra-low inflation is an obvious benefit for the UK economy — i.e. almost non-existent price rises in goods and services that consumers must buy, such as food and energy — frees up more disposable income elsewhere. It will also allow people to pay down debt and replenish savings that may have needed to be used during leaner times. This has been the driver of the UK recovery.

What does this mean for interest rates?

Jeremy Cook added: “The key for policymakers is as long as core inflation — prices without these essentials — remain strong, then the Bank of England will continue to look through these headline declines as temporary and not as a reason to adjust their position towards rate hikes. The rise to 1.2% - the highest in 5 months — will flesh out the argument that domestic inflation is building and that the headline figure is only this low due to external factors — commodities and the pound. This is crucial for interest rate hikes and we maintain our calls for a February interest rate increase”