Inflation bites in the United Kingdom as households come under price pressure

UK inflaiton is rising copy

Bank of England governor Mark Carney has said it would not be "appropriate" to build a "war chest in interest rate terms" to use in case of future shocks, even as he predicted inflation would rise above 3% in the short term.

"Measures of domestically generated inflation are consistent with there still being some slack in the economy", Ramsden said in a series of written answers submitted to a committee of lawmakers in Britain's parliament.

Ramsden said: "Despite continued robust growth in employment, there is no sign of second-round effects onto wages from higher recent inflation".

Tenreyro, meanwhile, aired her opinion that she wasn't yet ready to vote for a rate hike.

The ONS reported this morning the annual rate of United Kingdom inflation as measured by the Consumer Price Index had reached its highest level since April 2012 on the back of rising prices for food and recreational goods, along with transport costs, which fell by less than they did a year ago. Mark Carney, the BoE governor, has stated his opinion that an interest rate hike is forthcoming.

The BoE is set to publish its next Inflation Report with the MPC decision on November 2.

Carney added that a "material change in political circumstances", perhaps such as a Brexit no-deal, could change the Bank of England's forecasts for the United Kingdom economy.

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Markets will also be paying close attention to Mr Carney's appearance before the Treasury Select Committee today.

He said it is more likely than not that he will write open letter to Chancellor Philip Hammond, explaining why inflation exceeded the target by one percentage point.

Carney, who is due to address lawmakers on Tuesday, has stressed that interest rate rises, when they come, will be modest and gradual, partly because of the uncertainty surrounding Brexit.

A reversal in the Bank's post-Brexit-vote, quarter percentage point cut in base rate looks nearly certain in November, particularly after news today that the consumer price index (CPI) rose at an annual rate of 3% in September. We expect inflation to approach summit in October.

"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".

"The overall tone from the testimony supports our view of a rate hike in November", said Barclays after mulling the Q&A session.

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