LONDON, (Reuters) – British inflation last month rose by more than expected to hit its fastest rate since January, picking up from a 4-1/2-year low, official data showed on Tuesday.
Consumer prices rose 1.9 percent on the year in June, the Office for National Statistics said. Economists taking part in a Reuters poll had expected inflation to rise to just 1.6 percent from 1.5 percent, a four and a half year low, in May.
Separate data showed house prices also picked up speed, with property prices in London jumping by a record 20.1 percent over the 12 months to May.
Inflation in Britain had been largely declining over the last year, helping the Bank of England to hold off on raising interest rates despite Britain’s surprisingly strong economic recovery.
Tuesday’s data caused British government bond prices to tumble and sterling to rise as markets grew more confident that the Bank of England could raise rates before the end of the year.
“The amount of spare capacity in the UK economy is being eroded,” said ING economist James Knightley. “Given the BoE is targeting inflation in 2 years’ time, not what it is doing right now, we now favour a rate hike in November.”
However, some economists said the scale of June’s inflation increase was largely driven by one-off factors.
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