Inflation rises sharply
The consumer prices index (CPI) rate of inflation rose sharply to 1.9% in June 2014, up from 1.5% in May 2014, according to official figures.
The Office for National Statistics (ONS) said rising prices in clothing, footwear, food and transport were responsible for the unexpected increase.
This is the seventh consecutive month that the CPI rate has been under the Bank of England’s 2% target.
Key ONS figures:
- clothing and footwear prices added 0.18 percentage points to the inflation figure
- food, non-alcoholic beverages and transport prices added 0.07 percentage points
- all categories contributed to the rise in inflation except miscellaneous goods and services which dropped 0.03 percentage points.
David Kern, chief economist at the British Chambers of Commerce, said:
“The increase in inflation in June should not spark a knee jerk reaction on interest rates by the Monetary Policy Committee (MPC).
“The UK recovery is still not secure and growth amongst UK businesses must be fostered prior to any future interest rate rises.
“To sustain business confidence, the MPC must be more clear and consistent on the future path of interest rates, while the government must place more emphasis on improving access to finance for growing firms and exporters.”
John Allan, national chairman of the Federation of Small Businesses, said:
“With inflation rising more than expected to 1.9%, the government needs to keep a watchful eye over the impact on small firms. Small business confidence is at a record high, with many looking to increase investment and take on staff, this has to be maintained.
“If government wants small businesses to continue to have a big impact on the growth of the UK economy, it is crucial that further rate rises are gradual. This will enable firms to plan ahead and keep the cost of doing business down.”