The Consumer Prices Index (CPI) 12-month rate of inflation increased to 1.0% in July, rising from 0.6% in June, according to new figures from the Office for National Statistics (ONS).

The ONS also revealed the CPI that includes owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.1% in July, which was up from 0.8% in June.

Over the last 10 years, the ONS stated that the largest contribution to the annual CPIH inflation rate came from either housing and household services or transport. However, the latest figures showed this changed in April because of a combination of reduced household utility bills and falling motor fuel prices.

Since then, the largest contribution has come from recreation and culture, with the largest contribution to the CPIH 12-month inflation rate in July reaching 0.33 percentage points.


Kingswood CEO, Rupert Thompson, commented on the figures: “Core inflation is now at its highest level in a year and only slightly below the Bank of England’s 2% target which will be a relief for the Monetary Policy Committee and take some of the pressure off for further policy easing.

“Both the demand and supply side of the economy have seen sizeable shocks in recent months which is feeding through into increased volatility in the inflation numbers and therefore not too much should be read into this latest rise.

“Still, this increase follows hard on the heels of last week’s similarly unexpected pick-up in inflation in the US and highlights the fact that just as the outlook for growth remains quite uncertain across much of the world, so does the outlook for inflation.”

Hargreaves Lansdown personal finance analyst, Sarah Coles, added: “Savers are getting squeezed between the rock of rising inflation and the hard place of falling savings rates. You can currently beat inflation with the most competitive accounts, but if you don’t act now, you could see the life crushed out of your savings.
 
“In the fixed rate market, you can beat inflation by fixing for as little as one year. Unfortunately, the vast majority of people won’t. Most of our savings is in easy access accounts with the high street giants – most of which pay 0.01%. Our research shows that half of savers haven’t switched accounts for at least five years and two-thirds don’t have any plans to switch in future.
 
“The most common reason not to bother is that rates are so low it hardly seems worth it, but the difference between 0.01% and 1.16% can translate into hundreds of pounds a year if you have significant savings.”

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