British inflation has accelerated for the first time in four months, primarily as a result of a rise in energy costs, rising more than expected from 1.7% to 2.3%. Services inflation – the BoE’s main concern nowadays – printed slightly higher than the survey estimate, but in line with policymaker forecasts at 5.0%.
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The conclusion from this report is relatively straightforward: services inflation is still uncomfortably high, the Bank of England will stick to the gradual rate cuts that it promised, and a pause in December is still very likely.
The market has trimmed an already minimal chance for another rate cut but the end of the year and that’s helping sterling at the margin this morning.
The one positive sign is that many of the big uplifts in services have come from volatile components like education, restaurants, and rents, which policymakers tend to look through on a month-by-month basis.
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