United Kingdom inflation rises to highest level in five years

Posted October 18, 2017

If it had risen any further, Bank of England Governor Mark Carney would have to write to Treasury chief Philip Hammond explaining why inflation is more than a percentage point above the 2 percent target and what he and his colleagues at the central bank were going to do about it. "Despite continued robust growth in employment there is no sign of second-round effects onto wages from higher recent inflation".

'Inflation rising potentially above the 3% level in coming months is something that we have anticipated.

Silvana Tenreyro, the LSE professor who was appointed in June to replace known MPC "hawk" Kristin Forbes, said that as spare capacity in the economy is eroded, she will be minded to vote for tighter policy.

"The Consumer Prices Index including owner occupiers' housing costs (CPIH) 12-month inflation rate was 2.8% in September 2017, up from 2.7% in August 2017; it was the last higher in March 2012", the ONS said.

"I think it's more likely than not that I will be writing on behalf of the MPC a letter to the chancellor", Carney said.

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Inflation rate climbs to 3%.

"The tick upwards in inflation will increase expectations of a rate rise from the BoE later on this year, stoked by a flurry of hawkish rhetoric coming from Threadneedle Street". We expect inflation to approach summit in October.

James Smith at ING, arguing that underlying inflation is actually below the BoE target if ignoring the impact of sterling and energy, also felt a November rate hike was "highly likely" - though as CPI should peak at 3.1% in October and then gradually start to ease back, any subsequent MPS tightening "is likely to be very limited".

(Update:) Inflation has hit a five-year high of 3% and the question on everybody's lips is will the Bank of England raise interest rates next month? Inflationary pressures have been mounting since the European Union referendum result in 2016 collapsed the value of the British pound, resulting in more expensive imports.

"Overall, today's data are consistent with our view that the Monetary Policy Committee will raise interest rates in November, but it won't be panicked into doing so by concerns about inflation".