"Despite the Bank of England’s prediction that inflation would peak in July, today’s figure of 2.7% up from 2.5% last month marks an unwelcome rise in inflation"
July's increase was the first in 2018, following three months of static inflation at 2.4%.
CPIH, which the ONS uses as its headline measure and which includes owner occupiers’ housing costs, increased from 2.3% to 2.4%.
Rising prices for a range of recreational and cultural goods and services, transport services and clothing produced the largest upward contributions to the change in the rate between July and August.
Miles Eakers, chief market analyst at Centtrip, commented: “UK inflation rose for the second consecutive month and at a much faster pace than expected. The Bank of England will be keeping a close eye on the pace of price increases, but the key is the outcome of the Brexit meeting in Salzburg.
“The IMF and the BoE have both warned of the negative impact of a “no-deal” Brexit, but Brexiteers continue to try and derail UK Prime Minister’s Chequers plan. A no deal scenario is probably the worst outcome for the UK economy and the Pound – it would lead to further uncertainty and a potential reaction from the markets.
“Any positive UK-EU news today will provide a much needed boost to Sterling, but with US President Donald Trump’s global trade offensive in full swing, any rise in the Pound against the Dollar is likely to be short-lived.”
Kate Smith, head of pensions at Aegon, added: “Despite the Bank of England’s prediction that inflation would peak in July, today’s figure of 2.7% up from 2.5% last month marks an unwelcome rise in inflation, for the second month in a row.
"However with wage growth marginally outpacing inflation, UK workers are offered a crumb of comfort that earnings above inflation mean they’re better off or at least the squeeze of the cost of living has been somewhat alleviated.
“A relatively small difference isn’t exciting on the face of it, but if wage growth continues to outstrip inflation, it will make a difference over the longer term to how much ‘extra’ disposable income people have. Rather than spending this extra amount individuals may want to think about saving it in a pension or ISA for later life.”
