Inflation figures (released on 16th August 2011) provided no surprises as CPI increased to 4.4% (up 0.2% from June) and RPI remained steady at 5.0%.

Risers
Unusually there was not one single component that drove the increase in CPI annual inflation between June and July. Instead, upward pressures came from a number of different ‘areas’, the largest being miscellaneous goods & services.  Here the upward pressure came from a wide variety of goods and services.  By far the largest contribution came from financial services where, overall, fees rose this year but fell a year ago, particularly for arranging mortgages.  Is this an unintended consequence of adviser charging – part of the FSA’s impending changes following the RDR?

Fallers
There was only one large downward pressure to the change in CPI annual inflation between June and July. Surprisingly this came from food & non-alcoholic beverages sector where prices, overall, rose by only 0.3% between June and July this year compared with a rise of 1.0% a year ago.

Outlook
With many external pressures on inflation outside the control of the Bank of England expect inflation to remain high for some time to come. The only consolation of this is that basic state pension increases (protected by a “triple lock”) will increase by RPI, the increase in average earnings or 5% – whichever is the greater.  This looks like RPI at the moment