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| UK inflation rate rises to 2.9% in June | UK inflation rate rises to 2.9% in June |
| (35 minutes later) | |
| The rate of consumer price index (CPI) inflation increased to 2.9% in June, up from 2.7% in May, according to the Office for National Statistics (ONS). | The rate of consumer price index (CPI) inflation increased to 2.9% in June, up from 2.7% in May, according to the Office for National Statistics (ONS). |
| The figure, a 14-month high, was lower than the 3% expected by markets. | The figure, a 14-month high, was lower than the 3% expected by markets. |
| A rise in the inflation rate had been anticipated because of higher petrol and clothing prices versus a year ago. But it was moderated by slower annual rises in airfares and food prices. | A rise in the inflation rate had been anticipated because of higher petrol and clothing prices versus a year ago. But it was moderated by slower annual rises in airfares and food prices. |
| Retail prices index (RPI) inflation also rose, to 3.3% from 3.1% in May. | Retail prices index (RPI) inflation also rose, to 3.3% from 3.1% in May. |
| The RPI index is used to calculate many pensions, as well as inflation-linked government bonds. It is calculated differently as it includes some housing costs and other items not included in CPI, and is typically higher than the CPI measure. | The RPI index is used to calculate many pensions, as well as inflation-linked government bonds. It is calculated differently as it includes some housing costs and other items not included in CPI, and is typically higher than the CPI measure. |
| Cheaper airfares | Cheaper airfares |
| The ONS said that air transport played the biggest role in dampening inflation this month, with fares falling 2.8% during June, compared with a 7.4% increase in June 2012, due to lower European air fares in particular. | The ONS said that air transport played the biggest role in dampening inflation this month, with fares falling 2.8% during June, compared with a 7.4% increase in June 2012, due to lower European air fares in particular. |
| Clothing and footwear prices fell 1.9% during the month - as they typically do during the summer sales - but the fall was less than the 4.2% drop seen in June last year, which the ONS said had been the largest such decline on record. | Clothing and footwear prices fell 1.9% during the month - as they typically do during the summer sales - but the fall was less than the 4.2% drop seen in June last year, which the ONS said had been the largest such decline on record. |
| Food prices fell half a percentage point during June, led by a fall of close to 2% in the cost of fruit and vegetables. | |
| Despite reaching its highest level in over a year, the CPI measure remains well below the 4%-5% range experienced during much of 2011. | |
| The Bank of England is supposed to keep CPI as close as possible to 2%. If it veers above 3%, the new Bank governor, Mark Carney, would be required to write a letter of explanation to the Chancellor George Osborne. | |
| The lower inflation rate also gives the Bank more leeway to pursue monetary stimulus, such as its buying up of government debts via quantitative easing, and its plans to start providing "forward guidance" from August - a commitment to keep interest rates at their historic low of 0.5% for longer. | |
| The pound fell three quarters of a cent against the dollar to about $1.506 on the news, as markets took account of the likelihood of UK interest rates remaining at record lows. |