U.K. Inflation Rate Surges to Highest in Almost Two Years

• U.K. Inflation Rate Surges to Highest in Almost Two Years

U.K. inflation accelerated to the fastest in almost two years in September, according to data from the Office for National Statistics published in London on Tuesday.

Key Points

• Inflation rate rose to 1 percent — the highest since November 2014 — versus 0.6 percent in August. Median estimate of economists was 0.9 percent
• Core inflation at 1.5 percent, the highest in two years. Median estimate was 1.4 percent
• Factory-gate prices rose annual 1.2 percent, most in three years
• ONS says not seeing explicit evidence of pound weakness in consumer-price changes, but it is affecting producer prices

The Big Picture

Bank of England officials have warned that the pound’s decline will push inflation above their 2 percent target. Still, Governor Mark Carney has said he’s comfortable with a modest overshoot as he keeps up efforts to support the economy. Economists surveyed forecast the BOE will cut its benchmark interest rate to 0.1 percent next month.

Economist Takeaway

“Even though 1 percent is still some way off the Bank of England’s 2 percent inflation target, the impact of currency changes works with a lag so further rises in CPI should be expected,” said Tom Stevenson, investment director at Fidelity. “Inflation is expected to continue its upward charge.”

Other Details

• Input prices rose an annual 7.2 percent in September, compared with 7.8 percent in August. That’s partly due to crude oil, up 14.2 percent.
• Total import costs increased 9 percent
• ONS says the increase in producer price inflation over recent months can be “partly attributed to the changes in the sterling exchange rate.” Pound has fallen about 18 percent since U.K. voted to leave the EU in June