UK inflation surged more than expected to its highest level in over a decade in November, adding pressure on the Bank of England to raise interest rates.
Consumer prices rose 5.1 per cent from a year earlier, the most since September 2011, boosted by the cost of clothing, auto fuel and second-hand cars. Core inflation, which strips out energy and other volatile items, climbed to 4 per cent, the highest since 1992.
The overall rate of inflation was up from 4.2 per cent in October. It has increased by 3.1 percentage points in the space of just four months, the fastest gain on record.
The reading will present a challenge for BOE policymakers, who are also weighing the risks of the new coronavirus variant to the economy. The central bank had been widely expected to raise borrowing costs on Thursday, but the emergence of Omicron has led to speculation a move will now be delayed until the New Year.
The pound spiked briefly after the data, before giving up gains to trade 0.1 per cent higher at $1.3248 at 7.42am in London. Money markets held BOE rate hike wagers steady, betting that concerns over Omicron will prompt policy makers to maintain rates on Thursday. They see the central bank raising rates in February.
The reading will be “uncomfortably high for the MPC, but Omicron necessitates a little more patience,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Nonetheless, the jump above 5 per cent comes far sooner than the BOE had expected, with officials only predicting the measure would peak around that level early next year.