Country’s annual rate of inflation based on wholesale prices shot up to 3.55 percent for July from 1.62 percent in the previous month, due to an 11.82 percent jump in prices of food articles, official data showed on Tuesday.
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Input prices rose 4.3% in the year to July, compared with a drop of 0.5% in the year to June, as it was partly impacted by the fall in the value of the pound, which drove up the cost of imported metals and chemicals.
Anna Stupnytska, global economist at fund group Fidelity, said the expected pick-up in inflation, coupled with falling yields as the Bank of England cuts interest rates and relaunches quantitative easing, would lead to a “double whammy” for savers’.
The ONS said the increasing cost of petrol, alcoholic drinks and accommodation services were the main contributors to the rise in the consumer prices index (CPI).
Inflation rose to 0.6% in July in the first signs of the impact of the pound’s heavy fall following the “Brexit” vote on prices.
Britain voted on June 23 to leave the European Union – a decision that could tip the economy into recession and has also led to a sharp fall in sterling, driving up import and input costs.
WPI inflation in potato shot up 58.78 per cent, pulses (35.76 pc), vegetables (28.05 pc) and cereals (7.03 pc).
The rise in import prices is one of the first pieces of official data covering developments in the economy since the referendum.
The data sent the pound up around half a cent against the dollar to $1.2988, although most analysts still expect the Bank of England to cut interest rates again later this year.
Consumer price inflation picked up in the wake of the UK’s Brexit vote, hitting its highest rate since November 2014.
“As such, this is unlikely to prevent the (Bank of England) from pressing ahead with further monetary policy loosening”, she said. “Given the extent to which inflation likely will overshoot the 2% target, we think the MPC will hold back from additional Government bond purchases next year once the current £60 billion tranche has been completed”. A year ago it was zero, the lowest since comparable records began in 1950.
The ONS said the Retail Prices Index (RPI) – a separate measure of inflation, which includes housing costs – rose to 1.9% in July, up from 1.6% in June.
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An ONS measure of core consumer prices – which strips out changes in the price of energy, food, alcohol and tobacco – was 1.3 percent higher in July than a year earlier, in line with forecasts in a Reuters poll.
