"It's almost certain that the weaker pound will cause inflation to rise more sharply in the coming months, but the effect of sterling's depreciation will take time to feed through fully into the figures as businesses gradually adjust to the new environment".
-Ben Brettell, Hargreaves Lansdown
On Tuesday, the Office for National Statistics has revealed the UK's inflation rate on the yearly basis which is still quite weak. Nevertheless, slight increase could be noted compared to the previous month, namely from 0.5% to 0.6%. Many economists would prefer to see a rate around 2%. According to the announcement, consumer price index measure of inflation went up from 0.5% in June, and was also pushed by advance in alcoholic drinks and accommodation. Economists, in turn, had expected inflation to remain unchanged during the previous month. The following numbers show the highest inflation since November 2014. Meanwhile, the Retail Price Index, which is another inflation measure, expended by 1.9% in July being highly above forecasts of a rise of 1.6%. In the meantime, RPI is used to set rail fares for next, train fares on around half of UK journeys – including all season tickets and day returns – will increase by 1.9% from next January. Inflation has been a major concern for the Bank of England as it has for other major central banks.
Eventually, the British Pound jumped by about 60 pips following the release. Moreover, the GBP/USD was already modestly higher on general dollar weakness prior to the CPI data, but is now currently rising by about 73 bps to $1.2974.
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