* UK June CPI +1.9 pct year on year vs forecast +1.6 pct
* Clothing, food prices responsible for jump
* Sterling rallies, bond prices fall on news
* Some economists say rise due to one-off factors
* GRAPHIC: UK inflation link.reuters.com/sub42v
(Adds comments from BoE's Carney, Kohn, context)
By Andy Bruce and William Schomberg
LONDON, July 15 British inflation surged to a
five-month high last month and house prices rose at their
fastest rate in years, prompting investors to increase bets on
an interest rate rise before the end of 2014.
Underlining the challenge facing the Bank of England as it
tries to manage Britain's accelerating economic recovery,
consumer prices rose 1.9 percent on the year in June, official
ONS data showed.
The jump from a four-and-a-half-year low of 1.5 percent in
May far outstripped forecasts for only a slight rise, according
to a Reuters poll of economists.
Separate figures showed the real estate market also picked
up speed as London property prices leapt by a record 20.1
percent over the 12 months to May.
Speaking after the data - which brought consumer price
growth close to the Bank's 2 percent target - BoE Governor Mark
Carney said inflation expectations were "extremely well
anchored" and had improved over the last year.
"I am aware of today's CPI number, but I would only draw
attention that in (our) May forecast, inflation returns to
target at the end of the forecast horizon, only gets back to 2
percent three years out," Carney told lawmakers.
Consumer price inflation in Britain had been largely
declining over the last year, helping the BoE to hold off on
raising interest rates despite Britain's surprisingly strong
Several economists said the scale of June's inflation
increase was largely driven by one-off factors.
But British government bond prices tumbled after the data
and sterling rose as markets grew more confident that the BoE
could raise rates before the end of the year.
"The amount of spare capacity in the UK economy is being
eroded," said ING economist James Knightley. "Given the BoE is
targeting inflation in two years' time, not what it is doing
right now, we now favour a rate hike in November."
The largest contribution to the year-on-year increase was
from clothing and footwear prices - which did not fall as
usually occurs in June, when summer sales tend to start.
An official from the Office for National Statistics said
there were signs that good weather last month may have deterred
retailers from cutting prices.
Elizabeth Martins, an economist with HSBC, said the clothing
effect was likely to be smoothed out in July's data.
"The June numbers represent an abrupt halt to a first half
in which inflation has, by and large, come in below expectations
but it is too soon to conclude that the UK's disinflationary
trend is turning," she wrote in an email to clients.
Before December last year, annual inflation had exceeded the
BoE's 2 percent target every month since December 2009, eroding
the spending power of households and making falling living
standards a big political issue ahead of next year's elections.
A think tank report on Tuesday showed young Britons' incomes
fell almost twice as much as those of older people in the five
years after the financial crisis.
Separate data from the ONS showed house prices in Britain
rose 10.5 percent in the year to May.
While other more recent surveys suggest rapid growth in
house prices has started to cool a little, the ONS figures were
a reminder that momentum remains strong.
In his appearance before lawmakers, Carney reiterated his
belief that the housing market is the biggest risk to Britain's
economic recovery, and one of his colleagues highlighted the
limits of the Bank's power to temper rapid house price gains.
"I do think there is an issue on the relentless upward
pressure on house prices but it is not one the (bank's)
Financial Policy Committee can really address," said Donald
Kohn, who sits on the committee.
Excluding London and the south east, British house prices
rose by 6.4 percent in the 12 months to May, the highest in
nearly four years.
(Additional reporting by David Milliken, Editing by Jeremy
Gaunt and John Stonestreet)