The pace at which prices are rising has sped up, according to official figures.
The rate of inflation grew to 2.2% in July, up from 2% a month earlier, data from the Office for National Statistics showed.
It is the first time since December last year that the rate has increased, rather than fallen. This means that prices rose slightly faster than before.
But it’s increased less than central bankers at the Bank of England and economists polled by Reuters had forecast.
Those observers anticipated a rise to 2.3%.
What could this mean for interest rates?
Inflation coming in lower than expected could help the rate-setters at the Bank to lower interest rates faster or sooner.
Because of high inflation, interest rates were brought up, making borrowing more expensive. At present investors expect the interest rate will be kept at 5% at the next Bank rate-setting meeting in September.
There was also a better-than-expected fall in another measure of inflation, one closely looked at by the Bank. Core inflation, which measures price rises excluding volatile food and energy costs, dropped to 3.3% from 3.5% in June.
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Analysts now think there’s a greater chance of a rate cut next month. Before the inflation data came in there was a 36% chance, which moved to a 45% likelihood of a cut
More expensive train tickets?
Rail ticket prices typically increase in line with the retail price index (RPI) measure of inflation for July.
If the increase is implemented in January it will mean train tickets becoming 3.6% more expensive.
The government, however, may decide against raising prices in line with RPI, as they did last year.
Why has inflation gone up?
The main reason inflation is higher is because energy bills didn’t fall as much over the summer as they did last year, the ONS said.
Higher gas and electricity prices meant raw material costs rose, which the ONS also identified as a cause of increased inflation.
Acting to push costs down was cheaper hotel and restaurant prices. Services inflation dropped to 5.2%.
In response to the figures the chief secretary to the Treasury Darren Jones said:
“The new government is under no illusion as to the scale of the challenge we have inherited, with many families still struggling with the cost of living.
“That is why we are taking the tough decisions now to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.”