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Consumer price inflation (CPI) in the U.K. hit a near two-year high in September and came out higher than forecast as a weaker pound put upward pressure on prices, official data showed on Tuesday.
In a report, the U.K. Office for National Statistics said the rate of consumer price inflation rose from the year before by a seasonally adjusted 1.0% last month, above forecasts for a gain of 0.9% and compared to the 0.6% increase seen in August. That was its highest level since November 2014.
Month-over-month, consumer price inflation rose 0.2% in September, compared to expectations for a 0.1% advance and the prior month’s 0.3% increase.
Bank of England Governor Mark Carney will have to write an open letter to the Chancellor of the Exchequer, Philip Hammond, as inflation is more than a percentage point below the central bank's target of 2.0%.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.5% last month above forecasts for a gain of 1.4% and compared to the 1.3% advance in August.
The retail price index (RPI) increased 2.0% in September, in line with forecasts and compared to August’s reading of a 1.8% increase.
Month-on-month, RPI advanced 0.2% in September, compared to the prior month’s increase of 0.4%. Analysts had expected a 0.1% rise.
Core RPI increased at an annualized rate of 2.2% in September, after the 1.9% gain seen in the previous month.
Month-on-month, core RPI gained 0.2%, compared to August’s reading of a 0.5% advance.
The data also showed that the house price index rose 8.4% in September, above forecasts for a gain of 7.9% and following a 8.0% increase in August that was revised from an initial 8.3% advance.
In an immediate reaction, GBP/USD traded at 1.2253 from around 1.2244 ahead of the release of the data, EUR/GBP was at 0.8990 from 0.8996 earlier and GBP/JPY exchanged hands at 127.46, compared to 127.36 previously.
Meanwhile, European stock markets traded higher. London’s FTSE 100 gained 1.13%, the Euro Stoxx 50 rose 1.38%, France's CAC 40 traded up 1.33%, while Germany's DAX advanced 1.08%.