UK inflation expected to hit seven-year peak

Food prices are thought to have helped drive inflation in the UK to its highest level since 1998 last month, experts will announce today.

Official figures due to be released by the British Office for National Statistics are expected to show Consumer Price Index (CPI) inflation rose to 2% in June after staying at 1.9% for the previous three months.

This would leave CPI – the Government’s preferred measure – in line with British Chancellor Gordon Brown’s target. May’s quarterly inflation report predicted that CPI would rise above its 2% target in the near term.

One analyst said food prices were likely to have driven the increase, while gas prices may also have had an effect after British Gas hiked prices in June.

Some of these pressures should be offset by transport, as air fares jumped sharply in May and could have fallen back last month, according to David Page of Investec Securities.

He added: “Even if inflation rises to target as forecast, we do not expect it to distract the Bank from cutting rates in August.”