UK inflation has risen for the first time since November to 2.5% in July, up from 2.4% in June, thanks to rising fuel costs and the price of computer games.
According to the Office for National Statistics, the Consumer Price Index increased as a result of rising prices from computer games and transport fares, which made the largest upward contributions during the month.
The increase in oil prices over the past year also fed through to a rise in energy inflation from 8.7% to 9.3%. The price of Brent Crude oil has risen from $50 per barrel a year ago to $72 per barrel.
The figure was in line with analyst expectations but less than the 2.6% expected by the Bank of England, which last week raised interest rates to 0.75%.
The largest downward contribution to the change in the 12-month rate came from miscellaneous goods and services, in particular insurance and the initial charges for unit trust investments. Some companies have recently removed their initial fees for these investments.
Following the release of the figures, sterling was down 0.06% against the US dollar to $1.27 while the FTSE 100 was down 0.15%.
Capital Economics UK economist Andrew Wishart said the recent depreciation of sterling is likely to prevent inflation from falling back as swiftly as we previously forecast. "Nonetheless," he added, "we still think that a fall back in oil prices and the ongoing reduction of the impact of the 2016 sterling depreciation will allow inflation to gradually ease to 2% by the end of 2019."
Zurich head of retail platform strategy Alistair Wilson said: "Inflation is creeping up again, pushing up the cost of living. This, coupled with low wage growth, the rise in interest rates making mortgage and loan repayments more expensive, and sterling continuing to fluctuate, is squeezing household incomes left, right and centre.
"The rate rise would have come as welcome news, particularly for those relying on the interest to supplement their income, but savers should not get carried away."
Brown Shipley investment analyst Jonathan Chitty added: "The Bank of England faces a difficult task in managing the need to promote economic growth against the backdrop of Brexit-based uncertainty with the requirement to keep inflation below 2%. On balance we consider that last month's unanimous decision to raise rates by 0.25% was the right one.
"Interest rate changes take some time to affect consumer prices, however, and it is perhaps unsurprising that markets do not expect another hike until the third quarter of 2019."
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