The 1.9% rise in June is up from a 1.5% rise in May and is perilously close to breaking the Bank’s own 2% or under target. The rise is the biggest since January.
The latest data increases the chances of an interest rate rise before the end of this year, with early 2015 now looking like the latest it would be.
Today’s figures are a continuation of a stream of public comments from MPC members and economic numbers over recent months which have seen consensus estimates for the first change in rates since 2009 shift a full year from late 2015 to late 2014.
Views on the significance of the inflation number among economists and other commentators appear mixed however.
“For quite some time we have been long the British Pound and bearish on gilts on the belief that the improving economic fundamentals may prompt the Bank of England to be the first among the leading developed central banks to tighten monetary policy via an actual rise in interest rates,” said Blackrock fixed income manager Scott Thiel. “Recent more hawkish comments by Governor Carney and the new inflation data have done nothing to dispel that view,” he added.
"The higher than expected inflation number, 0.4% up on the previous month, has meaningful implications for both consumers and the economy,” added Casper Rock, CIO at Architas. “A rise in inflation gives fuel to the calls for an interest rate rise before the end of the year as the cost of living increases,” he noted.
Orla Garvey, sovereign manager at Aviva Investors believes the figure released today will not make a big impact on the MPC however. “While this is a strong number, we do not think it necessarily changes the monetary policy debate, which should remain focused on earnings and the evolution of unemployment,” she said. “At the very least, it should give investors who are worried that the BoE will not raise interest rates in line with market expectations less cause for concern,” she added.
