UK inflation unexpectedly rises

Inflation in the UK unexpectedly rose to 2.6 per cent in July, up from 2.4 per cent in June, figures from the Office for National Statistics (ONS) indicate.

The rise in the Consumer Price Index (CPI) was mirrored by the Retail Prices Index (RPI) which also rose to 3.2 per cent from 2.8 per cent the previous month.

A rise in transport costs, particularly air fares, and retailers reigning in discounts on clothing and footwear were the biggest upward contributors. Air fares jumped by 21.7 per cent in July, said the ONS.

Vicky Redwood at Capital Economics called the first rise since March 'disappointing' but likely to be a 'temporary blip.'

The latest figures could make it more difficult for inflation to fall back towards the Bank of England's two per cent target by the end of the year, although many business groups and leading economists remain optimistic that the target is still obtainable.

However, David Kern chief economist at the British Chambers of Commerce (BCC) commented: "Recent increases in world food prices because of the drought in the US provide a reminder that there are still upward pressures."

The rise in inflation is coupled with news today that commuters will face rail fare increases of up to three times more than inflation.

Rail fares are currently set according to the rate of RPI inflation plus one per cent. Today's inflation rise will come alongside a change to the law which will allow fares to increase by RPI inflation plus an additional three per cent, due to come into force on 1 January 2013.

It is speculated to push fares up by an average 6.2 per cent in the New Year.