Core consumer price , which strips out changes in the price of energy, food, alcohol and tobacco, rose to 1.5% from 1.3%, slightly above economists' expectations for 1.4%. Factory gate prices increased 1.2%, the biggest increase in three years, and slightly stronger than forecasts of a 1.1% annual increase. The Office for National Statistics also released figures for August house prices, which showed an 8.4% annual rise across the United Kingdom as a whole compared with 8.0% in July. Prices in London alone increased 12.1%.
September’s rise in is only the start of a much broader increase, fuelled by the pound's near 20% plunge since June's vote to leave the European Union.
BoE Governor Mark Carney last week said the could tolerate "a bit" of an overshoot against its target, to help accommodate economic growth and employment. British government bond prices fell after the stronger than expected figures which will further dampen expectations that the Bank of England will cut interest rates again this year.
The forecast in August that would pick up sharply to hit its 2% target in around a year and then overshoot for the next couple of years, as sterling's big fall after Britain's vote to leave the EU pushes up the cost of imports. But the surge in risks proving bigger, after sterling plunged to its lowest level on record against a basket of currencies last week, something which is likely to force the BoE to revise up its forecasts next month.
The EUR/GBP is falling gradually in recent days, but 0.8967 (61.8% fibo of September-October rise) is still a strong . Breaking below this level will open the way to a further fall into the area of 0.8845/0.8780. We stay short for 0.8860 in the short-term part of our portfolio, but the long-term outlook remains .
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