U.K. CPI data released today indicated that inflation rose more than expected as consumer prices are increased at a faster pace in July.
The Office of National Statistics reported that June CPI jumped to 4.4% on an annual basis from a 4.2% gain in June. The forecast was for a slightly lower rate of 4.3%. A breakdown of the data show that clothes- price inflation accelerated to a record, followed by footwear, housing maintenance and rent prices.
Despite rising inflation, the Bank of England has not been raising interest rates, which are currently at a record low 0.5%. The bank is concerned that the slow economic recovery and a grim outlook does not merit a rate increase.
Economic growth slowed to 0.2 percent in the second quarter from 0.5 percent in the previous three months. BOE governor King said on August 10 that “headwinds” are “becoming stronger by the day.”
After the release of the data, the pound began to rise against the dollar, from a pre-news low of 1.6333 to 1.6382 a half hour later.
The Bank of England will publish the minutes of its Aug. 4 policy meeting tomorrow, which will show whether Martin Weale and Chief Economist Spencer Dale maintained their vote to increase the interest rate.