UK inflation rose in July but underlying picture improves

Headline inflation in the U.K. rose modestly in July, but the underlying picture improved, smoothing the way for another interest rate cut by the Bank of England.

The Office for National Statistics said Wednesday the consumer price index rose by 2.2 percent from a year earlier, a small acceleration from 2.0 percent in the previous two months, as a big fall in energy prices a year ago dropped out of the annual calculations. The ONS’ broadest measure of inflation, which also includes housing costs, also tracked slightly higher to 3.1 percent.

However, service price inflation, which has been the BoE’s chief bugbear for the past year, eased markedly to 5.2 percent from 5.7 percent in June, due largely to a 0.4 percent fall in hotel and restaurant prices from June.