U.K. headline inflation accelerates in November, likely to start falling in early 2018

U.K. headline inflation surprised on the upside in November. On a year-on-year basis, the headline inflation accelerated to 3.1 percent year-on-year, rising 0.1 percentage point from prior month. This is the highest level since March 2012.

Today’s figure signifies that inflation has moved away from the target by over one percentage point and, thus the BoE governor Carney might have to write a letter to the Chancellor of the Exchequer explaining the reasons for the deviation and the MPC’s strategy to bring inflation back to 2 percent year-on-year.

Delving into details, the transport category was the biggest positive contributor to the change in the annual rate, while the recreation and culture category, driven by higher computer games prices, also gave marked support. These are volatile items, and the changes in price might be reversed in months ahead. The data released today strengthens the projections that U.K, inflation has reached its peak.

“While we expect that a further increase in energy CPI will help to maintain the headline CPI rate close to this level in December, most likely it will start falling early next year”, stated Daiwa Capital Market Research.

At 19:00 GMT the FxWirePro's Hourly Strength Index of British Pound was highly bearish at - -159.941, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 2.09928. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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