UK consumer price inflation remained at 3 per cent in January, according to latest official data, holding the same level as recorded in December.
News of inflation levelling-out at its highest in six years saw Sterling strengthen as investors were bolstered in their belief that the Bank of England will raise interest rates again in May.
The rate of inflation last month, as reported by the Office for National Statistics (ONS), remained close to November’s six-year high of 3.1 per cent.
Most economists were expecting a small fall in the CPI to 2.9 per cent but today’s announcement prompted markets to price in as much as a 70 percent chance of a quarter-point rise in interest rates by May, and a roughly 50 percent chance of a further increase in rates to 1 percent by the end of the year – a level last seen in 2009.
Sterling jumped to as high as $1.3924 this morning after the ONS data was published, up from $1.3886 beforehand. It was trading at $1.3906 by 1012 GMT, up half a percent on the day.
Against the euro, sterling strengthened by a third of a percent to 88.59 pence.
The ONS said that although petrol prices had risen by less than this time last year, the cost of entry to attractions such as zoos and gardens fell more slowly.
It said, however, that after rising strongly since the middle of 2016, food price inflation now appeared to be slowing.
ONS senior statistician, James Tucker, said: “Factory goods price inflation continued to slow, with food prices falling in January. The growth in the cost of raw materials also slowed, with the prices of some imported materials falling.”