British inflation hits six-year high, triggers Carney letter to Hammond

Annual CPI growth was lifted by a 0.3% month-on-month increase in November, which was up from the 0.1% rise in October and higher than the 0.2% consensus forecast.

- United Kingdom inflation rises more than expected, hitting a near six year high of 3.1% in November.

Icra's Principal Economist Aditi Nayar said the uptick in the CPI inflation was significantly sharper than expected, validating the caution displayed by the Monetary Policy Committee of the RBI in its recent reviews.

The inflation data comes only a day before the release of the latest snapshot of Britain's labour market, which is expected to show average weekly earnings excluding bonuses only grew 2.2% year-on-year in October. Inflation was last higher in March 2012.

As the current rate of inflation is more than 1% away from the Bank of England's 2% inflation target, governor Mark Carney will be required to write a letter to Chancellor Philip Hammond to explain how he intends to bring inflation back under control.

Inflation rose unexpectedly to 3.1 percent in November from 3 percent in October. The Bank of England has a tricky tightrope to walk. This view also corroborates with the RBI's consumer confidence index that dropped to a four-year low of 91.1 in November 2017 from October's 95.5. It kept interest rates steady and stressed a neutral policy stance.

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The ONS said the largest upward contributor to rising inflation between October and November was transport costs, which increased by 0.1%, compared with a fall of 0.3% during the same period a year ago.

"It's quite possible that inflation is now close to its peak", said Lucy O'Carroll, chief economist at Aberdeen Standard Investments.

On overall basis, the inflation in the food segment increased to 4.42 per cent in November as compared to 1.9 per cent in the preceding month.

In November, pre-empting a potential explanatory letter, the Bank of England raised its main interest rate by a quarter-point to 0.5 percent, its first hike in a decade.

"Too much inflation could threaten the Bank's credibility and therefore its grip on the economy", she says.

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