Consumer price inflation (CPI) in the U.K. unexpectedly increased in May, marking a fresh 4-year high official data showed on Tuesday.
In a report, the U.K. Office for National Statistics said the rate of consumer price inflation rose from the year before by a seasonally adjusted 2.9% last month. That was above forecasts for the reading to remain steady at April's 2.7% and was the highest rate of annual inflation since June 2013.
Month over month, consumer price inflation rose by 0.3% in May, compared to forecasts for a 0.2% increase and the 0.5% gain registered in the previous month.
The ONS indicated that rising prices for recreational and cultural goods and services (particularly games, toys and hobbies) was the main contributor to the increase in the rate along with smaller upward contributions from increased electricity and food prices.
"These upward contributions were partially offset by falls in motor fuel prices, and air and sea fares, the latter two influenced by the timing of Easter in April this year," the ONS said.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 2.6% last month, higher than forecasts for it to remain on hold at April's reading of 2.4%.
The retail price index (RPI) increased by 3.7% in May, after rising by 3.5% the previous month. Analysts had expected no change to April's increase.
Month-on-month, RPI increased by 0.4% in May, compared to a 0.5% advance in the prior month. Economists had forecast a 0.3% gain.
Core RPI increased at an annualized rate of 3.9% in May, after rising by 3.8% the previous month. Economists had expected a repeat of April's performance.
Month-on-month, core RPI increased 0.4% last month, compared to April's 0.5% rise.
The data also showed that the house price index rose 5.6% in May, above forecasts for a gain of 3.7% and following a 4.5% increase a month earlier. April's data was revised from an initial 4.1% rise.
Following the report, GBP/USD traded at 1.2707 from around 1.2705 ahead of the release of the data, EUR/GBP was at 0.8824 from 0.8827 earlier and GBP/JPY changed hands at 139.95, compared to 139.98 previously.
Meanwhile, European stock markets traded higher. London's FTSE 100 inched up 0.07%, the Euro Stoxx 50 rose 0.31%, France's CAC 40 traded up 0.34%, while Germany's DAX advanced 0.44%.