The UK Consumer Prices Index (CPI) rose from 1.5 percent in May to 1.9 percent in June reports the Office for National Statistics (ONS).

The largest contributions to the rise in the rate came from the clothing, food & non-alcoholic
drinks and air transport sectors said the ONS.

The inflation measure which includes home owner-occupier costs (CPIH) rose from 1.4 percent in May to 1.8 percent in June, while the amended Retail Prices Index (RPIJ) went from 1.7 percent in May to 2 percent in June.

Commenting on the data John Bulford, economic advisor to the EY ITEM Club, commented:

“This month’s increase in inflation had always been on the cards given the unfavourable base effects from last June’s seasonal patterns in clothing prices and air fares.

CPI to June 2014

Click Graph to Expand

“These base effects should fade from next month and there appears to be little else to prevent inflation slipping back to around 1.5% over the second half of the year.  After their Iraq-related rally, oil prices have dropped sharply over the past week, while the pound remains strong, subduing import prices. Today’s data suggest that – if anything – the pressures coming along the supply chain are disinflationary.

“In its May Inflation Report the Bank had forecast CPI inflation of 1.8% in Q2, a little above the outturn of 1.7%. So the reality is that today’s data should not alter the monetary policy equation. Indeed, given that the MPC’s main reason for considering hiking rates is the fear of wage inflation taking off, tomorrow’s labour market release is likely to be more important for monetary policy.

“The ONS house price data is consistent with the story being told by the more timely Nationwide and Halifax data. Other indicators, most notably mortgage approvals, suggest that the heat has started to come out of the market as the Mortgage Market Review changes begin to bite and we expect to see house price inflation cool a little over the second half of the year.”

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