The surge in UK inflation to a 10 -year high has restored market expectations for the Bank of England (BOE) to raise its interest rates.
In October, the annual inflation rate was reported to have risen to 4.2% from 3.1% recorded the previous month, and exceeded expectations for a 3.9% increase, according to data released by the National Statistics Office (ONS).
This recorded figure is also the highest reading ever recorded since December 2011 as it was driven by increases in housing costs, natural gas and electricity prices.
Although the increase in inflation is said to be only temporary, but in fact the BOE is concerned about the rising price pressures.
Governor Andrew Bailey said on Monday that he was very ‘unhappy’ with the inflation outlook despite having kept his interest rates unchanged at a policy meeting this month.
The central bank now expects inflation to rise higher to around 5% next year, before falling back towards the 2% target by the end of 2023.
Following this encouraging reading, the pound jumped to around 1.3470 against the greenback. The currency had previously risen following positive readings in UK jobs data, but declined again due to a strong US dollar.
