United Kingdom inflation breaches BoE target as it hits 2.3%

21 March, 2017, 11:55 | Author: Valerie Burke

Consumer price inflation (CPI), which has been the main measure of price rises since 2003, rose at an annual rate of 2.3 per cent in February, up from 1.8 per cent in January, according to the ONS.

The move would be the first above-target rise since November 2013 and will put pressure on the Bank's Monetary Policy Committee (MPC) to hike interest rates beyond 0.25% this year.

The jump in the consumer prices index takes inflation above the Bank of England's 2% target and is above the 2.1% reading investors had been expecting. The Bank of England's target for inflation is 2pc.

He said: "With upward pressure from the weak pound and higher global oil prices than a year ago, inflation is showing no signs of plateauing".

"If anything it must still be noted that medium-term inflation expectations seem to be well anchored and such prospects are likely to keep the BoE neutral on rates, irrespective of last week´s hawkish twist", currency analysts at Credit Agricole wrote in a note to clients.

"Typically higher inflation has been bearish sterling to the extent that it pushes United Kingdom real yields lower", said Sam Lynton-Brown, currency strategist at BNP Paribas.

The ONS said that sterling weakness, which has seen the pound fall by some 16% since the June Brexit vote, had contributed to increase in price across both categories.

Economists had expected CPI inflation of 2.1% for February.

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