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| Inflation climbs to 3.8% in June | Inflation climbs to 3.8% in June |
| (about 1 hour later) | |
| Rising food and fuel costs pushed UK inflation up to 3.8% in June from 3.3% in May, official figures have shown. | Rising food and fuel costs pushed UK inflation up to 3.8% in June from 3.3% in May, official figures have shown. |
| The rise means inflation is now well above the government's 2% target, and may reduce the chance of a UK rate cut. | |
| The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth. | The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth. |
| The RPI inflation measure - often used as a benchmark in pay negotiations - rose to 4.6% in June from 4.3% in May. | The RPI inflation measure - often used as a benchmark in pay negotiations - rose to 4.6% in June from 4.3% in May. |
| Food and non-alcoholic drinks were the main factors fuelling the rise in inflation, with prices increasing by a record 2.1%, the ONS said. | |
| Meanwhile, surging oil prices have driven up the cost of fuel with the average price of petrol increasing by 5.3p a litre. | |
| The only ray of sunshine for consumers during the month was a drop in the cost of shoes and clothes as retailers cut prices in an attempt to attract more business. | |
| Rate dilemma | Rate dilemma |
| The figures, which came in above forecasts for the third month in a row, mean the Bank of England is now likely to have less breathing space to cut interest rates. | |
| The Bank is currently trying to balance growing evidence of an economic slowdown against the problem of rising inflation. | The Bank is currently trying to balance growing evidence of an economic slowdown against the problem of rising inflation. |
| The fact that the economy's slowing will bring inflation down, but not till next year John Cridland, CBI | |
| "The Bank of England can't cut rates until it is convinced inflation is moving downwards," said James Knightley, economist at ING. | "The Bank of England can't cut rates until it is convinced inflation is moving downwards," said James Knightley, economist at ING. |
| However, the British Chambers of Commerce (BCC) warned it would be a "serious mistake" if the Bank's Monetary Policy Committee (MPC) decided to tackle rising inflation by raising rates. | |
| "Further increases in CPI inflation, to levels above 4%, are inevitable in the next few months whatever the MPC decides to do," said BCC economic adviser David Kern. | |
| Economic gloom | |
| The inflation figures add to mounting bad news for the economy. | |
| Earlier on Tuesday, the British Retail Consortium said that like-for-like sales on the UK's High Streets were down 0.4% in June compared with a year earlier. | |
| On Monday, figures showed that factory gate prices - a measure of how much manufacturers charge for their goods - rose 10% in the year to June, the first double-digit annual rise for more than 20 years. | |
| However, the CBI business group said that while UK businesses will be facing a few "tricky" months as consumers tighten their purse strings, there could be a "silver lining" in store for the economy. | |
| "The fact that the economy's slowing will bring inflation down, but not till next year," said CBI deputy director general John Cridland. |