Consumer prices were unchanged and so in line with expectations in July. However, this was still strong enough to lift the annual inflation rate by a tick to 2.5 percent, its first rise since November last year.
The main positive contribution to the minor acceleration in the yearly rate came from recreation and culture, which added 0.1 percentage points, alongside transport (0.04 percentage points) and food and non-alcoholic beverages (0.03 percentage points). The principal negative effect was in miscellaneous goods and services (minus 0.06 percentage points).
As a result, the core CPI dipped a further 0.1 percent versus June which left its 12-month rate steady at 1.9 percent, equalling its lowest reading since March. The CPIH, the measure preferred by the ONS, was flat on the month and 2.3 percent higher on the year, similarly matching its end of quarter outturn.
The July data mean that headline inflation has now been above its 2 percent medium-term target for seventeen months in a row. However, the sub-2 percent core rate suggests that underlying price pressures, at least for now, remain limited, in line with the stickiness of wages. This should increase the likelihood of no further change in Bank Rate in 2018.