Economists expected a 0.2% rise. July’s increase in the CPI was a slowdown from the 0.3 percent gain in June.
Advertisement
“The rise in the core figure suggests that underlying inflationary pressures could be building in the economy, and is possibly the clearest indication yet that the Bank of England might have to raise interest rates sooner rather than later”, he said. Other sources of inflation over the last three months included furnishings & household maintenance as well as restaurants &hotels. The Fed has said that it needs to feel “reasonably confident” that inflation is moving back to its 2 percent goal before beginning to raise interest rates.
However, Yellen said the Fed doesn’t necessarily need to see inflation accelerate to hike rates, but simply must be reasonably confident it will pick up in the medium-term.
The uptick in consumer prices was partly due to a 0.2 percent increase in food prices, which came as all six major grocery store food group indexes increased. Shelter prices are up 3.1% from a year earlier.
Estate agent Knight Frank released a separate report forecasting that house prices would rise a further 18.2 per cent between now and 2019.
The country’s consumer price index did rise by 0.1 percent year on year, however, which was higher than a Reuters poll for a 0.0 percent change. Economists expect the drop in air ticket prices, which was the largest since December 1995, will be temporary.
Oil prices began to fall sharply in the middle of past year causing gasoline prices to plummet.
In the 12 months through July, the core CPI increased 1.8 percent. Still, this trend is not expected to be maintained in the coming months, especially with worldwide food prices declining and with the strong dinar.
Advertisement
Prices for some goods that are typically imported fell last month. An economic slowdown in China and Europe has also curtailed global demand, which can limit price increases. “Overall, it is true to say that these figures are well in line with expectations and it looks as though the retail landscape is remaining steady”. The increase reflects only slight inflation and increase average hourly pay and hours worked. But applications to purchase homes fell 1%.
