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UK inflation rises unexpectedly

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UK inflation rises unexpectedly
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There was a surprise jump in inflation in Britain in July.

It inched up to 2.6 percent from 2.4 percent in June – that was the first increase since March.

Factors included airfares rising sharply and less of a cut that expected in clothing prices.

Last week, the Bank of England slashed its inflation forecast, saying it sees consumer prices nearly back at the Bank’s two percent target by the end of this year. That leaves expectations for more central bank stimulus intact for now.

Analysts said the July figures were bucking a broader trend. “We really need to take the June and July figures together and this implies that the downward trend in prices remains in place,” James Knightley, an economist at ING, said.

“The rise in oil prices and food commodities presents some risks for headline inflation in coming months, but with the weak economy implying only limited corporate pricing power we still expect inflation to fall below two percent by the end of the year,” he added.

A fall in inflation is seen as a crucial ingredient for a recovery from the recession the economy tipped into around the turn of the year.

“Inflation has halved since its peak in September but any increase is disappointing,” a finance ministry spokesman said. “The government knows how tough things are for families at the moment.”

Many Britons have experienced the worst squeeze in living standards in over 30 years and scaled back spending as higher taxes and rising prices have eaten up meagre wage increases.

Inflation has fallen sharply from the three-year peak of 5.2 percent hit in September 2011, and June’s fall had been much sharper than expected, driven in part by the early summer sales.