United Kingdom inflation rises to highest level in five years

GETTYThe pound was up ahead of an appearance by Governor Mark Carney

GETTYThe pound was up ahead of an appearance by Governor Mark Carney

Dave Ramsden, the new deputy governor of the Bank of England said that he was not in support of voting for an interest rate hike, calling into question when the BoE will implement its first interest rate hike in over ten years.

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

He said he expects the rate to peak this month or in November at slightly more than 3 per cent, and that he and colleagues at Bank of England had expected inflation to hit 3 per cent around now.

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

"To increase interest in future potential shocks, inflation does not mean staying in our goal", said Carney, pointing out that re is no right strategy for immediate increase in order to reduce policy interest in future.

"My view is that we are approaching a tipping pint at which it would be necessary or justified to remove some of that stimulus", Tenreyro said Tuesday.

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.

The Bank governor is required to write to the Chancellor, Philip Hammond, if inflation moves more than one per cent above the 2 per cent target level.

Carney gave no further detail on when this might come, but reiterated that it was on the mind of the monetary policy committee and most members thought a raise "over the coming months may be appropriate". She added that a premature rate hike could prove more costly to the economy than an early rate cut.

Inflation in Britain rose at the fastest pace in over five years in September, remaining above the Bank of England's 2% target for the seventh consecutive month, after breaking through the threshold for the first time in three years in March. That suggests investors are now less certain of a November rate hike.

"We expect BoE rate hike expectations to remain well supported into the November inflation report and they will continue to underpin GBP against Euro and USD", CACIB adds.

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