CPI inflation caught markets unawares as it jumped to its highest level in four years. Following the shock release, Viktor Nossek, director of research at WisdomTree in Europe, said:
“Inflation has caught markets unawares today, accelerating to 2.9% as the cost of goods and services – rather than imports – drove it higher.
“The situation remains volatile. With uncertainty over the political situation in the U.K. already impacting Brexit negotiations, the pound has come under pressure once more and is now at its lowest level for months.
“It’s expected to remain volatile and succumb to more downward pressure, providing yet another unwelcoming rise to import cost induced inflationary pressures for consumers.
“Combined with indications of economic activity weakening, as evidenced by both actual GDP and retail sales decelerating markedly against a backdrop of weakening business sentiment, the BoE is unlikely to tighten soon. It’s clearing the path for inflation to hit 3%.”