Inflation hits 20-month high while cost of food falls at slower rate

The Consumer Price Index (CPI) rose by 0.6% over the last 12 months to July, compared to a 0.5% increase in the year to June, ONS figures revealed.  

The higher rate equates to a 60 pence increase in the cost of a basket of goods and services between July last year and last month. 

Food prices fell 0.2% between June and July this year, compared with a larger fall of 0.7% at the same time last year.

Although the BRC and Nielsen shop price index indicates a deflationary trend in food prices, food prices are falling at a slower rate now than they were a year ago.

An upward contributor was the rising cost of milk, the ONS said, which fell dramatically last year. This was partially offset by the falling price of meat, which went up this time last year.

The figures provide an official snapshot of the effect of the EU referendum on prices. Since the June 23 vote, the pound has fallen by about 10% against the dollar since the vote, pushing up the price of imports.

However, the ONS points out that the inflation rate is still relatively low in the historic context.

The Retail Price Index (RPI) measure of inflation rose to 1.9% in July from 1.6% in June, which will result in increasing rail fares across the UK.