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UK Inflation Strongest In A Decade

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UK consumer price inflation rose at the fastest pace in more than a decade in November, far exceeding expectations, ahead of the Bank of England's monetary policy announcement on Thursday.

Consumer price inflation rose to 5.1 percent in November from 4.2 percent in October, the Office for National Statistics said on Wednesday.

This was the highest rate since September 2011, when inflation stood at 5.2 percent. The rate was forecast to rise to 4.7 percent and stayed well above the central bank's 2 percent target.

At the November meeting, the BoE had projected inflation to peak at around 5 percent in April 2022 and to fall back materially from the second half of the next year.

Markets had widely expected the central bank to hike its key rate at the December meeting as inflation remains stubbornly high and the labor market tightens further.

Given the emergence of the new variant of coronavirus, economists now forecast the bank to sit tight on the rates in Thursday's session.

Inflation data makes Thursday's interest rate decision look closer, but on balance the BoE is more likely to keep rates at 0.10 percent until it learns more about the Omicron situation, Paul Dales, an economist at Capital Economics, said.

While rates will rise sooner rather than later, with the current inflationary spike mostly driven by global supply constraints and price pressures, higher rates will do little to curb further price rises, Head of Economics at the British Chambers of Commerce Suren Thiru said.

On a monthly basis, consumer prices grew 0.7 percent, following October's 1.1 percent increase, ONS data showed. Prices were forecast to climb 0.8 percent.

Most of the increase in inflation was driven by one-off factors. Motor fuel prices advanced 5.1 percent and food and non-alcoholic beverages were up 1 percent.

Core inflation that excludes energy, food, alcoholic beverages and tobacco, advanced to 4 percent from 3.4 percent in October.

Another report from the ONS showed that factory gate inflation increased at the fastest pace since September 2008. Output price inflation climbed to 9.1 percent in November from 8.6 percent in the previous month.

On the month, the rate of output inflation was 0.9 percent, but down from 1.5 percent in October.

Further, data showed that input price inflation hit its highest rate since August 2008 driven by higher cost of chemicals. Input price inflation rose to 14.3 percent from 13.7 percent in October.

Month-on-month, input prices gained 1 percent versus 1.6 percent a month ago.

Separately, the ONS reported that the house price inflation eased to 10.2 percent in October from 12.3 percent in September.

The average house price was GBP 268,000. London was the region with the lowest annual growth at 6.2 percent.

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