Higher inflation will dampen UK growth prospects

16th July 2013

·         Annual CPI inflation was 2.

9% in June 2013, up from 2.7% in May ·         Annual RPI inflation was 3.3% in June 2013, up from 3.1% in May ·         Largest upward contribution came from motor fuels and clothing, partly offset by a downward contribution from air transport   Commenting on the inflation figures for June 2013, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:   -The rise in inflation is bad news for businesses and consumers, especially at a time when earnings growth remains weak and the government's austerity measures are in full swing. Inflation is now at the highest point seen over the past year, though still below the levels seen in 2010-11. The uncertainty is whether inflation will peak at its present level before falling later this year, as we expect. If this happens, it is still possible that the recovery will continue to slowly gather momentum throughout the year and into 2014.   -However if unexpected developments, such as renewed surges in energy prices, push inflation up further, our growth prospects will face new risks. Given the uncertainties, the MPC should remain cautious and reject any measures that could delay the fall in inflation that the economy needs.