Rail fares set for sharp increase as used car prices soar, new inflation data suggests

The July inflation measure normally used to set the following year’s rail fare increases has been recorded at 3.8% – the highest for ten years.

Figures published by the Office for National Statistics (ONS) showed the retail prices index (RPI) measure of inflation slipped back compared to June’s 3.9%.

But it was the highest reading for July – closely watched because that month’s figure is normally used to cap regulated rail fare increases – since 2011.

This year’s increase, which took effect in March rather than January, was 2.6%, representing the previous July’s RPI of 1.6% plus one percentage point.

A similar approach this year would see 2022 fares rise by 4.8%.

The government said no decision had yet been made on determining ticket price increases but that it was “considering a variety of options”.

ONS figures also showed that the headline consumer price index (CPI) measure of inflation was a lower than expected 2%, down from 2.5% in June.

That was driven by bigger than normal summer fashion discounts, as seasonal pricing patterns have been skewed by the timing of lockdowns.

Upward pressure on inflation came from an increase in used car prices, which are thought to have seen higher demand partly thanks to the global shortage of semiconductor chips delaying the supply of new vehicles.

Motorists have also been hit by a rise in petrol prices to the highest level for nearly eight years as the global cost of crude oil recovers following a slump at the start of the pandemic.

Economists still think inflation will rise sharply over coming months with the Bank of England recently predicting that it would hit 4% later this year.