Petrol prices push up inflation rate

Rising petrol prices helped drive up the rate of inflation to its highest level for two years, according to official figures published today.

The Office for National Statistics (ONS) reported that inflation in June rose from 3.1% to 3.3% - its highest since July 1998.

The key underlying inflation rate, which excludes mortgage interest payments and is used by the Bank of England when setting interest rates, was also up from 2.0% to 2.2% - which is still below the government's 2.5% target.

The ONS said the main reason for the rise in inflation was a steep increase in prices at the petrol pumps because of the higher cost of crude oil. The average price of a litre of unleaded petrol rose from 80p to 84p in June compared to an average of 70p a year ago.

The cost of crude oil has risen sharply in past months. But Saudi Arabia, the world's leading oil producer, has said it intends to increase output to drive down prices.

The annual rate of increase for petrol and oil prices was 18.4%.
The inflation figures were also affected by the wet spring, which pushed up the price of potatoes and other fresh fruit and vegetables.

The eurozone measure of inflation - the harmonised index of consumer prices - was also up, from 0.5% to 0.8%.

Economists believe that the Bank of England, which has kept interest rates
unchanged at 6% for the past five months, will not raise rates this summer because the economy is showing signs of slowing down.