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Last Updated: Tuesday, 12 July 2005, 10:00 GMT 11:00 UK
Consumer inflation climbs to 2%
Strawberries for sale
Fruit, footwear and soft drinks have all pushed up inflation
UK consumer price inflation (CPI) hit 2% in June, the first time it has touched that level since the new preferred measure was adopted in 2003.

The Office for National Statistics (ONS) data showed an increase from May's 1.9% number, and was the highest CPI figure since 2.1% in May 1998.

The increase may dampen expectations that the Bank of England could cut interest rates from the current 4.75%.

Annual retail price inflation, which includes housing costs, stayed at 2.9%.

The largest upward effect on CPI came from food, mainly fruit and meat.

Rising clothes and shoe prices, as well as more expensive soft drinks, also pushed the CPI figure up.

However the figure remains in line with the with the target of 2% set for the Bank of England's monetary policy committee (MPC) by chancellor Gordon Brown.

No fuel factor

"In line with expectations, up 2.0%. Bang in line now with the MPC's target," said Adam Chester, chief economist at HBOS group.

"It's quite interesting that the main upward effect came from seasonal food prices - that was largely expected.

"What's also potentially interesting is that oil prices, petrol prices, don't appear to have impacted significantly on the June CPI."

He said the main impact from those increases would be seen in the July and August figures.

The largest downward effect on inflation came from recreation and culture, particularly audio-visual goods as prices for a range of products, including computers and DVDs, fell this year but rose a year ago.

Cheaper package holidays this June, particularly to Mediterranean destinations, also contributed to the downward effect.

Headline retail price inflation, which includes mortgage interest payments, remained at the May figure of 2.9%.

Meanwhile, the underlying retail price index rate, which excludes mortgage costs, increased to 2.2% from 2.1%, in line with forecasts.




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