Consumer prices index inflation has risen to a 14-month high, official figures show, and economists are split on whether this will represent a peak.
The Office for National Statistics says CPI inflation advanced to 2.9 per cent in the year to June, up from the 2.7 per cent reported in the previous month. The inflation rate is “slightly above” the figures seen over the past year but below the levels reached between the start of 2010 and spring 2012, the ONS adds.
Higher petrol and clothing prices were cited as placing the largest upward pressure on inflation, with air transport being the biggest downward contributor.
Capital Economics UK economist Samuel Tombs says: “Looking ahead, it seems likely that June’s inflation figure will represent this year’s peak.
“Indeed, with leading indicators pointing to a fall in core inflation in the second half of this year, we think that CPI inflation is likely to fall back to the 2 per cent target by the end of the year.”
However, IHS Global Insight chief UK and European economist Howard Archer notes that oil prices have recently firmed to trade at a three-month high of $109 a barrel, which is likely to cause further rises in CPI inflation.
“June is unlikely to mark the peak in inflation. We expect inflation to climb a little higher over the summer to peak around 3.1 per cent and then to start coming down gradually from the fourth quarter,” he says.
“Consumer price inflation seems likely to move modestly higher over the next few months primarily due to a recent firming in oil prices, sterling’s weakness and challenging base effects.”