Britain’s inflation rate increases hit a five-month high in June, after the consumer price index rose to 1.9% following rises in food and clothing prices.
While the rising rate has fuelled speculation that interest rates could also be set to increase, there is little sign yet of such a move by the Bank of England.
The figure for June was 0.4% higher than in May, leaving many economists wondering when the first interest rate hike will occur.
Higher increases than expected
With the Bank having a target figure of 2%, the latest rate is closing in on that, while the June figure was significantly higher than predicted.
A Reuters poll had forecast a small increase to 1.6% but a number of factors had an influence on ensuring that the rate would be considerably higher than that, according to the Office for National Statistics.
The retail price index also rose in June to 2.6%, up from 2.4% a month previously while clothing and footwear were driving the increase in CPI rate.
This is common ahead of the summer season but the warmer conditions have caused many retailers to delay sales on summer items, although this will probably change in July and August.
Costs up on the previous year
Compared to last year, food and non-alcoholic drinks are considerably higher, as is the cost of airfares and furniture.
Clothing and footwear prices were up by 0.6%, with bread and cereal 1.2% higher in June and soft drinks 1.4% higher.
Air fares jumped by 7% and boat travel cost 5.2% more, while the cost of alcohol and tobacco also rose significantly, boosted by sales from the build up to the World Cup.
The pound strengthened further against the dollar as a result of the latest inflation figures, while June marked the sixth consecutive month that inflation was below the Bank of England target.
Prepaid options to control spending
While this is good news for those travelling to the United States, it does however mean that more money is required for the necessities of living in the UK.
As a result, it’s very important to remain vigilant of finances given the effects that a potential interest rate rise could have.
One option to limit the amount spent would be to invest in a prepaid card option, as only the specific funds on these types of card can be spent.
With wage growth still lagging behind, the Bank is unlikely to rush into any changes, but this could change if the situation improves rapidly in the months ahead.
Any potential changes could also impact on the political situation in the UK, with the general election due next May – meaning everyone is keeping a close eye on the economy.