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Sales fail to bring UK inflation down

British underlying annual inflation rose unexpectedly in July to 2.9% from 2.8% in June, as higher costs for clothing kept price rises above government targets.

Underlying prices, excluding the volatile effects of mortgage repayments, fell by 0.1% in July from June, the national statistics office said. Economists had forecast a drop in prices of around 0.3% for the month, and an annual rate of 2.7%.

Underlying inflation has now been above the official target of 2.5% for nine months in a row.

The main reason for the increase in the 12-month figure was higher prices for clothing and shoes, especially women's clothing, due to fewer bargains than normal in summer sales, National Statistics said.

High street shops around Britain have reported bumper business over the past two months as the country enjoys a generally sunny and warm summer.

More expensive travel costs also contributed, but that was because a specific index for air fares, including seasonal prices rises, was included in the data for the first time, National Statistics said.

Nonetheless, the surprise inflation seems to reduce the chances of further interest rate cuts by the Bank of England from the current 48-year low of 3.5%.

Headline inflation also rose to an annual pace of 3.1% in July from 2.9% in June. Prices were unchanged in July from June.