Today’s CPI figures increases the chance of a December rate rise

Commenting on this morning’s CPI inflation figures, Melanie Baker, senior economist at Royal London Asset Management said: 

"Today’s consumer price index inflation (CPI) figures are clearly a long way above the Bank of England’s 2% CPI target. The main driver of the jump in CPI inflation, as expected, came from energy prices and there will also have been an impact from the start of the phasing out of last year’s VAT cut on hospitality. Inflation driven by these things can largely be described as transitory.'

"Given that the Bank of England were expecting a 3.9%Y number for this release, it is worth bearing in mind that a big jump in inflation in itself won’t have come as a surprise for them.  What will be important for the Bank is a broadening out of inflation pressure beyond things easily labelled as transitory. Given the scale of the surprise in these numbers and the jump in core inflation, that will apply to some of the rise in inflation today. There were downward contributions to inflation in October from a few of the main components, but these were relatively small. 

"In isolation, today’s upside surprise increases the chance of a December rate rise, but there are several key data releases to go before then, including another set of business surveys and labour market data."