"We'll see volatility in inflation over the summer because of discounting last year; it's clearly heading above 3 percent,"
- Rob Wood, an economist at Berenberg Bank
Britain's consumer prices inched higher last month, reaching 14-month high, boosted by an increase in airfares and food costs, which offset a gain in fuel prices. A survey conducted by the Office for National Statistics showed that consumer prices jumped 2.9% from the same month a year earlier, compared with a 2.7% rise in May, however, below analysts' estimations of 3%. On a monthly basis prices fell 0.2%, while the annual rate of core inflation, which excludes volatile energy, food, alcohol and tobacco prices, rose above forecast reaching 2.3%. The ONS also said that the main contributor for dampening inflation in June was air transport, with fares falling 2.8% over the month, compared with 7.4% in June 2012. Clothing and footwear also dropped 1.9% during the month, a typical decline for summer sales.
The Bank of England, which targets at 2% inflation rate, expects price pressure to continue rising in the near term, saying it should reach a 2013 peak of around 3.1% during the third quarter, most likely in September, before starting to decelerate slowly toward the 2% target over the horizon of the next couple years. In case inflation will hover above 3%, the BoE Governor Mark Carney would have to write a letter of explanation to the Chancellor George Osborne.
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