Unexpected rise in inflation in Britain

British inflation rose unexpectedly in July, boosted by clothing and footwear prices after retailers enjoyed bumper sales in the month before, according to the official statistics from the British Office for National Statistics.

Retail prices excluding the cost of home loans, fell by 0.1% in July bringing the annual rate up to 2.9% from 2.8%. Analysts had forecast a small decline in the annual rate.

The Bank of England (BoE) received this information in advance, before deciding to keep interest rates at a 48-year low of 3.5%.

The BoE is expected to cut its growth forecast for Britain's economy.

Most analysts predict interest rates at best on hold with futures markets pricing in a rise by the end of the year, driven by strong consumer spending figures and signs that even the long-suffering manufacturing sector may be turning round.