UK inflation hit 5.1% in November, exceeding expectations of 4.8% and reaching its highest point since September 2011.
On a monthly basis, inflation increased by 0.7% in November, compared with a fall of 0.1% in November 2020.
Richard Carter, head of fixed interest research at Quilter Cheviot wrote that “unfortunately for consumers, peak inflation may still be a few months off.”
Andrew Pottie, senior portfolio manager at Titan Asset Management, added: “This is no surprise given the increase in drivers of cost push inflation we have seen in recent weeks. The true uncertainty remains whether this above expectation, and trend, data will continue to persist longer than the Bank of England have forecasted.”
The bank was front of mind for analysts when examining the data, with the upcoming rates decision from the Monetary Policy Committee.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown wrote that while the bank would ordinarily raise rates when faced with this data, the new omicron variant has likely left policymakers “in wait-and-see mode tomorrow”.
However, she noted that despite a potential upcoming lockdown that could damage consumer sentiment and spending, it was unlikely that there would be an extended lockdown, leaving a February rates hike still likely.
Pottie agreed, adding that “we have seen a significant drop in expectations of a hike by the Monetary Policy Committee’s December meeting as both growth and inflation expectations dampen while UK citizens look down the barrel of another lockdown.
“Given last meeting’s policy surprise, the seamless run-off of the furlough scheme, evident from this week’s unemployment data, adds further uncertainty to the picture.”
The news came following a warning from the International Monetary Fund (IMF), which warned the bank against having to face “inaction bias” ahead of stronger-than-expected inflation, urging the bank to begin raising rates before inflation reaches a projected 5.5% in the spring.
Elliot Gulliver-Needham (Professional Adviser)