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U.K. inflation unexpectedly accelerated last month, boosted by the price of computer games and hotel accommodation.
The pickup to 2.1% leaves consumer-price inflation above the Bank of England’s 2% target, figures from the Office for National Statistics show. Economists had expected the rate to slow to 1.9% from 2% in June.
The retail prices index rose 2.8% from a year earlier, as forecast. The result is important for commuters as increases in regulated fares, which cover around 40% of rail fares, are capped based on the July reading. Any rises will come into effect in January.
The figures are unlikely to tilt the debate at the Bank of England, where policy makers are expected to keep interest rates on hold until Brexit is resolved.
While wage growth is picking up, economists expect the BOE to cut rates if Britain crashes out of the EU in October without a deal. Core CPI inflation was 1.9% in July.
Upward pressure on inflation in July came from computer games and consoles, as prices recovered following sales in June. Restaurant and hotel prices rose more than a year earlier, while clothing and footwear prices fell less than they did in July 2018. There was also pressure from banking services, after prices fell a year following the removal of initial charges for investment in some unit trusts.
Downward pressure came from air, rail and sea transport fares, which rose at only a third of the pace seen in July last year. Auto and domestic fuel prices also weighed on inflation.
Other figures showed producer input prices rising 0.9% in July on rising fuel costs, leaving the annual increase at 1.3%. Output prices rose 1.8% from a year earlier.
House prices in England and Wales rose an annual 0.9% in June, the same rate as in May. In London, they fell 2.7%.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson
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