The rate of consumer price index (CPI) inflation increased to 2.9% in June, up from 2.7% in May, according to the Office for National Statistics (ONS). The figure, a 14-month high, was lower than the 3% expected by markets. A rise in the inflation rate had been anticipated because of higher petrol and clothing prices versus a year ago. But it was moderated by slower annual rises in airfares and food prices. Retail prices index (RPI) inflation also rose, to 3.3% from 3.1% in May. The RPI index is used to calculate many pensions, as well as inflation-linked government bonds. It is calculated differently as it includes some housing costs and other items not included in CPI, and is typically higher than the CPI measure.
Cheaper airfares
Despite reaching its highest level in over a year, the CPI measure remains well below the 4%-5% range experienced during much of 2011. The Bank of England is supposed to keep CPI as close as possible to 2%. If it veers above 3%, the new Bank governor, Mark Carney, would be required to write a letter of explanation to the Chancellor George Osborne.....Read more here