Latest UK inflation data should put a floor under Sterling with pressure for some hawkish rhetoric in Thursday’s policy statement.
UK consumer prices rose 0.3% for November compared with expectations of 0.2% with the year-on-year inflation rate at a fresh 3.1%. This was above market expectations of 3.0% and the highest reading since March 2012 for the main inflation reading.
The core inflation rate held at 2.7% for the month which was in line with consensus foreacsts.
There was upward pressure on inflation from air fares which fell less than the previous year while prices for recreational goods also rose strongly.
Producer input prices rose 7.3% over the year which was above expectations and compared with a revised 4.6% the previous month. The PPI data indicates that there will be further upward pressure on inflation over the next few months despite hopes that the impact of Sterling depreciation would fade from late 2017.
The Bank of England also expected inflation to peak for the October reading, but the November rate has shown an increase which will also trigger doubts surrounding their forecasts.
The Monetary Policy Committee statement on Thursday will, therefore, need to reiterate the need to control inflation with some hawkish elements.
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