Britain’s inflation hit an eight-month high in November, with consumer prices rising by 2.6% year-on-year, up from 2.3% in October, official data showed.
This was the highest inflation rate since March, marking a sustained monthly increase and highlighting ongoing price pressures in the UK economy.
However, price increases in the services sector, a key indicator monitored by the Bank of England (BoE) to gauge underlying inflationary pressures, remained steady.
The steady rate of services inflation provided some relief to the central bank. The Office for National Statistics reported that services inflation remained at 5.0% in November, unchanged from October.
While economists had expected a slight increase to 5.1%, and the BoE had forecast a decline to 4.9%, the rate remained steady.
Investors slightly increased their bets on the possibility of a BoE rate cut next year, after previously reducing their bets earlier this week on strong wage growth data. The change in investor sentiment coincided with a weakening of sterling.
The rise in inflation is further away from the 1.7% recorded in September, the first time inflation has fallen below the BoE’s 2% target in almost three and a half years. During that period, inflation rates peaked at over 11%.
“Based on this mixed data, we continue to expect the Committee to vote 8-1 to keep the Bank Rate at 4.75% at its meeting tomorrow and to emphasize that a gradual approach to policy easing is warranted given the current evidence,” Goldman Sachs economist Sven Jari Stehn said in a note.
