Investing.com - Consumer price inflation in the U.K. rose unexpectedly in July, supporting the case for higher interest rates, official data showed on Tuesday.
In a report, the U.K. Office for National Statistics said the rate of consumer price inflation inched up by a seasonally adjusted 0.1% last month, up from a flat reading in June. Analyst had expected a flat reading in July.
Month-over-month, consumer price inflation declined 0.2% in July, compared to estimates for 0.3% drop and following a flat reading in June.
Bank of England Governor Mark Carney will now have to write an open letter to the Chancellor of the Exchequer, George Osborne, as inflation is more than a percentage point below the central bank's target of 2.0%.
BOE officials have said recently they expect inflation to hover around zero for much of this year, before accelerating back to target during 2016 and 2017.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.2% last month, up 0.8% in June and above forecasts for a reading of 0.8%.
The retail price index increased 1.0% in July, in line with expectations and unchanged from June.
The data also showed that the house price index rose 5.7% in June, unchanged from May and missing forecasts for a gain of 5.9%.
GBP/USD was trading at 1.5642 from around 1.5598 ahead of the release of the data, while EUR/GBP was at 0.7080 from 0.7107 earlier.
Meanwhile, European stock markets held on to losses. London’s FTSE 100 shed 0.45%, the EURO STOXX 50 declined 0.35%, France's CAC 40 slumped 0.45%, while Germany's DAX dropped 0.3%.