The UK inflation rate unexpectedly hits six-month highest

The UK inflation rate unexpectedly rose in August to 2.7%, the highest level in six months. Economists had expected a Consumer Prices Index rate of 2.4%. The pound rose after the data was released by the Office for National Statistics.

Wages are still rising more than inflation, with data last week showing wages, excluding bonuses, grew by 2.9% in the three months to July, reports BBC.

Rising prices for recreational goods, transport and clothing drove the rise. In July, CPI was 2.5%, which had been the first jump in the index since November.

Mike Hardie, head of inflation at the ONS, said: “Consumers paid more for theatre shows, sea fares and new season autumn clothing last month.

“However, mobile phone charges, and furniture and household goods had a downward effect on inflation.”

Prices rose less sharply for furniture, household goods and communications. Sterling rose to $1.32 following the news, its highest level since July.

“The numbers reinforce expectations that policymakers will gently lift interest rates over the next couple of years,” said Ben Brettell, senior economist at Hargreaves Lansdown.

The Bank of England raised its key interest rate for only the second time in a decade last month. The current interest rate of 0.75% is the highest since March 2009. It has also forecast that inflation will fall back to the target rate of 2% by 2020.

“The figures won’t come as welcome news to the Bank of England, though – they’ll be desperate to leave policy unchanged until we get some clarity over Brexit and won’t want to be forced into a rate rise by accelerating prices,” said Mr Brettell.

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