UK Aug CPI up 2.5 pct yr-on-yr, equals highest since records began in Jan 1997

Higher prices for computer games pushed up the target rate of inflation in the UK during August to its equal highest level since the current Labour government was elected in May 1997, official figures showed today.
The office for National Statistics said the consumer price index rose by 2.5 pct in the the year to August, up from the 2.4 pct in July. Analysts polled by AFX News had not expected any change in the annual rate.
The August rate is the equal highest since official records began in Jan 1997. The Bank of England raised borrowing costs in August, to 4.75 pct, following the energy-related spike up in the June CPI rate to 2.5 pct.
As a result, today's figures may stoke concerns that the central bank will raise its key repo rate another quarter point to 5.00 pct in November, ahead of its next quarterly economic projections.
On a month-on-month basis, CPI rose by 0.4 pct from July against the previous month's 0.1 pct fall. Analysts had expected a more modest 0.3 pct rise.
The statistics office said the largest upward effect on the annual rate came from recreation and culture, where prices for games, toys and hobbies increased by a greater amount this August than last, with the main contribution coming from computer games.
There was also a small upward effect from equipment for sport and open-air recreation, where prices overall increased this year but fell a year ago.
The statistics office said there were also large upward effects from furniture and furnishings, particularly bedroom furniture, materials for maintenance and repairs, and clothing and footwear.
The only downward contribution to the change in the annual rate came from transport, where the average price of petrol rose by less than last year to stand at 97.5 pence a litre on Aug 15, and from airfares for international travel, which increased by less than a year ago.
Analysts said petrol prices will be a major downward contributor in September as they have fallen in recent weeks as crude oil prices have dropped down to around 65 usd a barrel in barely a month from over 70 usd.
In its Inflation Report last month, the BoE did indicate any respite to inflation in August would be short-lived as a result of upcoming rises in university fees. However, its central forecast of inflation marching up to 3.0 pct over the coming months was partly based on higher energy costs.
The BoE is charged with setting a policy to achieve a 2.0 pct CPI inflation rate and justified its recent rate hike by the fact that CPI inflation has been rising by more than anticipated.
Elsewhere in today's release, the statistics office said the annual core CPI rate, which excludes energy, food, alcoholic beverages and tobacco, rose for many of the same reasons above to 1.1 pct in August from 0.9 pct in July. Analysts had expected an increase in the rate to 1.1 pct.
On a monthly basis, core CPI rose 0.4 pct against the 0.2 pct drop the previous month.
Meanwhile, the statistics office said the wider RPI measure of inflation, which is used in pension payments, rose by 3.4 pct in the year to August, up 0.1 percentage point on July's rate and expectations of no change.
The annual rate is now standing at its highest since December 2004's 3.5 pct.
On a monthly basis, RPI inflation was up 0.4 pct, double expectations of a 0.2 pct rise.
Meanwhile, the RPI-X measure, which excludes mortgage payments, was up by 3.3 pct year-on-year, up on July's 3.1 pct but in line with expectations. The annual rate is now at its highest level since November 1996 when it was also 3.3 pct. It was last higher in March 1993.
The Bank of England was previously charged with targeting the annual RPI-X rate at 2.5 pct.
On a monthly basis, RPI-X was up 0.4 pct increase recorded in June, ahead of expectations of a 0.3 pct rise.