Consumer prices index inflation has reached 4.4 per cent, higher than economists had forecast, driven by the costs of clothing, household rent and financial services.
Figures released by the Office for National Statistics on Tuesday showed CPI inflation for July had gone up from 4.2 per cent in June. Economists had predicted a rise of 0.1 per cent to 4.3 per cent.
The office said the main upward pressures came from financial services, clothing & footwear, furniture, household
equipment & maintenance and housing rent.
The main downward pressure to annual inflation came from food & non-alcoholic beverages.
The retail prices index (RPI) stood at five per cent in July, unchanged from June, meaning most rail commuters will face a fare hike of eight per cent.
Charles Jenkins, economist with The Economist Intelligence Unit, said the UK's inflation figures "contrasts with the euro area where the rate in June was 2.6% and coming down; in France the July rate was 2.1%.
"The difference between the UK and euro area in June can be partly explained by the 2.5 percentage point rise in VAT at the beginning of the year.
"But that does not explain, why, if the Bank of England is correct, it should be moving upwards while high oil and other commodity prices are levelling off.
"Since wages are limited by government stringency and the effect of high unemployment on the private sector, higher inflation means lower real wages and consequently less consumer spending power, which in turn will tend to slow the economy further”.