UK consumer price inflation rises to 4.4 percent

LONDON (AP) — Rising rents and banking fees pushed Britain’s annual inflation rate up to 4.4 percent in July.

The rate reported by the Office for National Statistics (ONS) Tuesday was up from 4.2 percent recorded in June.

The increase does not come as a surprise, as Bank of England’s governor Mervyn King recently warned that the rate could rise to over 5 percent in the coming months in the wake of rising utility bills.

The office said the upward pressure on prices came from several different factors, mainly rising rents, higher fees for financial services like arranging a mortgage, and from volatile bread and cereal prices.

Even though inflation is running at double the Bank of England’s target of 2 percent, rate-setters have refrained from raising borrowing costs given subdued economic growth levels.

The markets expect the Bank’s main interest rate to remain at the record low of 0.5 percent for many months to come.

Under the terms of the 1997 deal to give the Bank of England independence in setting interest rates, the governor has to write a letter to the government whenever inflation is more than one full percentage point away from the 2 percent target.

King said in a letter to treasury chief George Osborne published Tuesday that an increase in sales tax and rising global energy prices have pushed Britain’s annual inflation rate up. He confirmed inflation will rise to around 5 percent in coming months. He said he expects it to fall back down in 2012 but added that “significant uncertainties and risks around the outlook for inflation remain.”

King said the big risks to the British economy come from the rest of the world.

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