Britain’s annual rate of inflation climbed to 2.5 percent in June, data published on Wednesday showed, exceeding economists’ expectations. The British pound and government bond yields rose as investors weighed how the central bank might eventually react to the continued increase in prices.
The pace was the highest since August 2018. After the 2016 Brexit referendum, Britain went through a period of high inflation set off by the slump in the pound. Inflation rose 0.5 percent in June from the previous month, the fifth-consecutive month of increases.
Analysts noted that the price increases were broad-based, reaching across food, used cars, clothing and footwear, eating and drinking out, and fuel. Last month, Bank of England policymakers said they expected the inflation rate to temporarily rise above their 2 percent target, and even exceed 3 percent, before falling again.
Price rises are mostly contained to items that either fell a lot the previous year or are part of sectors reopening from the winter lockdown. This should allow the Bank of England to “continue to judge that rising inflation will prove temporary,” analysts at Royal Bank of Canada wrote.
The potential path of inflation has gripped investors and economists globally as they debate whether the increase might be sustained and force central banks to take action. On Tuesday, data showed the annual rate of inflation in the United States climbed to 5.4 percent, the fastest pace in 13 years. On Wednesday, Jerome H. Powell, the Federal Reserve chair, told House lawmakers that inflation has increased “notably” and is poised to remain higher in coming months before slowing down again.
The pound rose 0.3 percent against the U.S. dollar and 0.2 percent against the euro. The yield on 10-year bonds fell six basis points, or 0.06 percentage points, to 1.36 percent.
Elsewhere in markets
Stocks on Wall Street climbed, with the S&P 500 up 0.2 percent.
Most European indexes were lower. The Stoxx Europe 600 index fell 0.1 percent. London’s FTSE 100 fell 0.5 percent.
Oil prices dropped. Futures of West Texas Intermediate, the U.S. crude benchmark, fell 3.8 percent to $72.38 a barrel.