British annual inflation rose to its highest in over a year in June, official data showed today.
The Office for National Statistics (ONS) said the consumer price index fell by 0.1 per cent on the month but the annual rate still rose to 1.6 per cent from 1.5 per cent in May, in line with economists' expectations.
The figures add weight to the Bank of England's (BoE) view interest rates may need to rise to keep price pressures in check.
The main upward impact came from recreation and cultural items as costs of holidays, computer games and other entertainment products rose.
Although the annual figure is well below the BoE's 2 per cent target, it was the highest rate since March 2003.
Financial markets did not react to the figures, with gilt and short sterling futures trading in negative territory, in line with other international government debt markets.
Furniture and household equipment also had an upward effect on inflation as retailers offered fewer discount promotions than last year.
Petrol prices fell back slightly after recent rises, but by less than prices fell in June last year.
The largest downward effect on the CPI annual rate came from miscellaneous goods and services. This was due to financial services and reduced charges for foreign exchange services in particular, the ONS said.
Additional downward pressure came from food and non-alcoholic beverages as prices of fruits and meat dropped on the month. The annual rise in the food and beverages component was 0.8 per cent, the lowest rate since April last year.