LONDON: British inflation was higher than expected in September and house prices posted their biggest rise in almost three years in August, adding to scepticism about how long the central bank can hold down interest rates.
Annual consumer price inflation was unchanged from August at 2.7 percent according to the Office for National Statistics data on Tuesday, defying forecasts for a tick-down to 2.6 percent.
British government bond prices fell further after the release, lifting benchmark yields — a proxy for market interest rate bets — to a three-week high.
However, separate official data published yesterday showed that annual factory gate inflation slowed sharply in September, pointing to an easing in pipeline price pressures. “With house prices continuing to rise ... and tomorrow’s labour report set to show ongoing job gains, we continue to look for an early 2015 rate hike,” said ING economist James Knightley.
In August the central bank pledged not to raise borrowing costs before Britain’s unemployment falls to 7 percent - something the bank forecasts will take three years - unless inflation threatens to get out of control.
Bank of England policymaker Martin Weale reiterated his concerns that ‘forward guidance’ policies could stoke inflation expectations Data due today is expected to show the jobless rate remained at 7.7 percent in August.
Reuters
