United Kingdom inflation hits five-year high of 3%

United Kingdom inflation hits five-year high of 3%

Mr Carney was speaking minutes after the United Kingdom inflation rate for September was revealed to be 3 per cent, the highest for five years.

It means Bank of England Governor Mark Carney will be forced to write a letter to the Chancellor explaining why inflation has jumped above the target of two per cent.

The CPI data this morning revealed that prices of consumer goods, boosted by food and transport, are climbing at their highest rate since 2012.

The important thing is to focus on actions of bank's jurisdiction, Carney said, "we can contribute to price stability and financial stability".

The Bank's new deputy governor, Dave Ramsden, distanced himself from more hawkish MPC members by saying he was not close to voting for a hike.

'There has been much talk of a rate hike later this year by the Bank of England, but with so many areas of weakness in the economy, and high levels of indebtedness, a rate rise could be a step too far for the Bank of England, at least until there is more clarity on Brexit, ' he said.

And Tenreyro, who is an economics professor at the London School of Economics, said: "My view is that we are approaching a tipping point at which it would be necessary or justified to remove some of that stimulus".

'Despite continued robust growth in employment there is no sign of second-round effects on to wages from higher recent inflation, ' he told MPs.

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Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said inflation is likely to peak at 3.1% in October and return to target by late 2018, "discouraging" the Bank of England from raising interest rates a few times over the next 12 months.

"I think we are back where we started in terms of the balance of views", she said.

This may give the Bank added confidence for raising interest rates for the first time in more than a decade before the end of the year.

However, the impact of the lower exchange rate on inflation is set to ease as the annual change of prices due to the pound's decline drops out of the comparison. When inflation rises, it's more likely the central bank will raise interest rates to help slow the pace of inflation.

The latest report is in line with the forecast issued by the BoE in August, when it said it expected CPI inflation to peak at 3% in October this year.

Data on Tuesday showed United Kingdom inflation hit 3 percent in September, its highest level in more than five years and above the BoE's 2 percent target.

Also, there is a belief that the bank will lose credibility if once again it puts the market on notice for a rate hike and fails to deliver.