UK CPI beat expectations yesterday, posting a bullish 3.1%, up from the 3% forecasted. Airfares and computer games were cited to have contributed to the growth, with the weaker Pound putting further pressure on price of imports. The positive reading is the highest in nearly 6 years, although analysts believe this could be close to the peak for inflation. Bank of England Governor, Mark Carney, will now need to write to the Chancellor of the Exchequer and explain why inflation is over a percent above the target. This letter will be published in February alongside the inflation report.
It was a busy start to the day this morning, with the release of the UK Average Earnings figure, which posted as expected at 2.5%. This is the fastest rate registered this year, however, for the seventh month in a row is still below the inflation rate. The UK also released the unemployment rate which remained at the 42-year low mark of 4.3%. The Claimant Count Change posted a bearish 5.9k, as the labour market shows signs of slowing.
Across the pond, the Fed will be announcing their all-important rate hike decision, where they are expected to raise rates to 1.5%. With the hike being a near certainty, the markets will be closely watching the press conference which follows, for any hints of the plans and strategy for next year. The markets will be looking for further information of the number of hikes expected next year and when they are planned to be.