U.K. inflation in September has recorded the highest rate since April 2012 and it is another symptom of an economy which no longer requires ultra-low interest rates. The latest consumer price index (CPI) data from the Office of National Statistics indicated the consumer inflation rate was 0.3% in September, down from August’s 0.6% but in line with market expectations. Core consumer price inflation was also +0.3% for the month.
On an annual basis consumer inflation increased from an annual rate of 2.9% in August to 3.0% in September. Annual “core” consumer price inflation dropped back from +2.7% in August to 2.6%, although the difference was essentially due to rounding.
U.K financial markets reacted by sending bond yields lower. Both 5 year and 10 year gilt yields each fell 6bps to 0.72% to 1.28% respectively. Sterling finished the day weaker against both the USD and euro.
