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Inflation rises in wake of Brexit vote Inflation rises in wake of Brexit vote
(36 minutes later)
Consumer price inflation picked up in the wake of the UK’s Brexit vote to its highest level since November 2014. Consumer price inflation picked up in the wake of the UK’s Brexit vote, hitting its highest rate since November 2014.
The annual rate of CPI hit 0.6 per cent, up from 0.5 per cent in June and higher than City of London analysts had been expecting. The Office for National Statistics said the annual rate of CPI inflation was 0.6 per cent, up from 0.5 per cent in June and slightly higher than City of London analysts had been expecting.
The separate Producer Price Index (PPI) rose at an annual rate of 0.3 per cent, the biggest rise since June 2014, and following a 0.2 per cent fall in the previous month, reported the ONS.  A separate ONS measure of "factory gate" inflation rose at an annual rate of 0.3 per cent in July, the biggest increase since June 2014, and breaking two years of declines.
This suggests that the fall in sterling since the referendum vote is beginning to push up import prices, which should eventually feed through into consumer prices. This suggests that the record fall in sterling in the wake of the 23 June referendum vote is beginning to push up the import costs of domestic manufacturers, which should, eventually, feed through into higher consumer prices.
Analysts had expected the PPI to be flat year on year. Samuel Tombs of Pantheon said he expected the consumer price inflation rate to hit 3 per cent next year, above the Bank of England's official 2 per cent target.
The ONS said the main drivers of the increase in the consumer price rate increase were rising motor fuel prices, alcoholic drinks and accommodation services. "Inflation’s pick-up...will gain strong momentum in 2017, when sterling’s depreciation will boost core goods inflation" he said.
More follows "Labour market weakness might constrain wage growth soon, but with productivity also likely to fall sharply as the economy slows, firms’ cost pressures will remain intense".
The data sent the pound up around half a cent against the dollar to $1.2988, although most analysts still expect the Bank of England to cut interest rates again later this year.
"Today’s numbers are unlikely to unseat the Bank of England’s resolve in regards to using monetary policy to try to mitigate some of the negative economic impact from the Brexit shock" said Andy Scott of HiFX.. 
The ONS said the main drivers of the increase in the consumer price inflation rate in July were rising prices of motor fuels, alcoholic drinks and accommodation services.
"It looks probable that consumer purchasing power will be significantly diluted over the coming months as inflation trends higher and earnings growth is limited" said Howard Archer of IHS Global Insight.
"Companies may well look to clamp down on workers’ pay as they strive to save costs in a more difficult environment and as imported input prices are lifted by the weakened pound. Meanwhile, a likely softening labour market and reduced consumer confidence will dilute workers’ ability and willingness to push for higher pay awards".
Despite the CPI rate up-tick, the ONS measure of "core" inflation, which strips out relatively volatile energy and foods prices, eased from 1.4 per cent to 1.3 per cent in July.