The German economy shrinks, fueling fears of a recession – live business | Business

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City economists had predicted that the CPI would fall 1.9%, but now it exceeds the Bank's 2% target.

The unexpected increase could build up pressure on Threadneedle Street to raise interest rates, even if economic growth falters, in a potential sign that the UK could begin to reflect the stagflation of the 70's – when the growth has stopped but inflation has continued to rise.

The Bank said it could be forced to raise interest rates if Britain left the EU without an agreement, stating that the pound would plummet to increase the cost of imports.

However, most analysts believe that it would be necessary to reduce rates to support employment and growth.

The pound was subjected to intense selling pressure from Boris Johnson's elevation at no. 10, however the ONS claimed that it was still too early to identify whether the weakness of the pound had begun to raise the cost of living. He said the increase in the price of computer games, consoles and hotel prices increased more than they did last year had increased the CPI rate from 2% in June.

In an ironic turn in the face of public anger over British rail fares, ONS said that the low change in the price of an international train ticket in the last year has prevented inflation in the UK from rising mostly in June.

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