Central banks in advanced economies around the globe have been trying to manage inflation rates up for some years now. Despite the destructive nature of inflation on savings, central banks have stated their preference for inflation to be around 2% to 3%.
The Bank of England will undoubtedly be pleased now. According to the latest consumer price index figures from the U.K’s Office of National Statistics, consumer prices increased by 0.6% in August or by 2.9% in the previous year. July’s comparable figures were -0.1% and 2.6%.
Economists had expected a 0.4% increase or 2.8% for the year on the back of a weaker exchange rate but the figures seemed to catch financial markets by surprise. Sterling rose against other currencies, U.K 10 year gilts jumped by 9bps on the day and the odds of a rate rise by February increased significantly.