Inflation took unexpected leap in June

15 July 2014

Inflation took an unexpected leap in June, with the Consumer Prices Index rising to 1.9% from 1.5% in May, according to new figures from the Office for National Statistics.

The rise was largely due to price rises in the clothing, food and non-alcoholic drinks, and air transport markets.

Samuel Tombs, an economist with research firm Capital Economics, remains cautious in his outlook for inflation: "We maintain our longstanding forecast that CPI inflation could ease to about 1% by the end of this year and remain below the 2% target in 2015.

"Not only would this enable real earnings to finally stage a recovery, but it should also give the MPC scope to raise interest rates only gradually next year."

New inflation figures have prompted speculation about when the Bank of England might decide to finally raise interest rates.


Ben Brettell, senior economist at Hargreaves Lansdown, is conservative in his predictions for the eventual rate rise.

"Today's unexpected rise will raise speculation that the first interest rate rise could be around the corner. However, it's important to look at the overall trend rather than one month's number in isolation, as the monthly figures can be volatile, influenced by one-off factors."

The specific 'one-off factor' he refers to in this instance is a delay by clothing retailers to kick off their summer sales. Clothing prices usually fall in June when summer sales begin, but this year it seems that good weather may have caused retailers not to cut prices.

The Bank of England has a continuing target of keeping inflation to 2%.

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