UK inflation beats expectations to hit 2-year high in Nov, clothing prices provide biggest boost

Expensive clothing and the impact of June’s Brexit vote on the prices paid by consumers for technology goods pushed UK's inflation to more than two-year high in November. Data released on Tuesday by the Office for National Statistics showed UK consumer prices rose 1.2 percent compared with a year ago, beating economists’ expectation for a 1.1 percent annual rise.

Details of the report showed British factory gate prices rose at an annual rate of 2.3 percent in November, the biggest since April 2012, compared with forecasts of a 2.5 percent annual increase. Prices paid by factories for materials and energy fell more than 1 percent on the month but were up by nearly 13 percent compared with November 2015 - the biggest annual increase since October 2011.

Bank of England (BoE) forecasts that inflation would surge to about 2.8 percent by mid-2018, as sterling's slump after Brexit vote pushes up the cost of imports. November's data clearly underscores how inflation in Britain looks set to rise sharply next year. BoE Governor Mark Carney has said the central bank could tolerate some overshoot against its inflation target, to help accommodate economic growth and employment.

British inflation has been below the Bank of England’s (BoE) 2 percent target for nearly three years. BoE policymakers adopted a neutral stance last month and are largely expected to keep interest rates on hold this week. A BoE survey last week showed Britons expect a sharp rise in inflation over the coming year which has raised expectations that a hike in interest rates is on the way.

FxWirePro's Hourly GBP Spot Index was at 115.771 (Highly bullish) at 1200 GMT. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex