Oil prices hike inflation to 1.5%

BRITAIN'S inflation rate rose to its highest in over a year in May as high oil prices pushed up transport costs, official data showed today.

The Office for National Statistics said the rate of consumer price inflation rose to 1.5% in the year to May - a figure likely to reinforce the Bank of England's belief that medium-term inflation pressures are building up.

However the number, which was in line with economists' expectations, is still well below the BoE's Government-set target of 2% inflation. The last time the CPI was above 2% was in May 1998.

The largest upward effect on the CPI annual rate came from transport, which was due mainly to higher fuel and lubricant costs, after oil prices hit near-record levels in May.

The average unleaded petrol price rose to 82p a litre in May from 78p in April, the ONS said.

The Retail Price Index, which includes a housing component, rose at an annual rate of 2.8% on the back of rising oil prices and higher housing costs.

The RPI excluding mortgage interest payments rose at an annual rate of 2.3% compared with 2% in the previous month.

Food, furniture and carpets provided a downward effect on inflation.