Whatās going on here? Britainās consumer prices popped higher in October after a brief oasis. What does this mean? Two months ago, the yearly pace of inflation in the UK was down at 1.7% ā comfortably below the Bank of Englandās (BoEās) 2% target. But that mightāve been a fluke: consumer prices rose by an annual 2.3% in October. And sure, some of that increase was because utility bills jumped considerably higher when a government-imposed cap expired. But even the core inflation rate ā which strips out energy and food items ā sped up, rising at 3.3%. And since bad news tends to come in threes: services inflation also climbed faster than expected. Together, those uptempo moves suggest the BoE might have to roll slower with its interest rate cuts ā or risk a price rise supernova. Why should I care? For you personally: Putting away the scissors. Investors had been banking on another rate trim from the BoE this year, but thatās pretty much off the table now. Theyāve moved on to tempering expectations for rate cuts next year, betting on just two and laying 40% odds on a third. So Britain may see higher-for-longer interest rates. And that could stifle consumer spending, complicating the already tricky growth prospects in the worldās sixth-biggest economy. The bigger picture: House-price-warmings. Keep in mind, the BoE did lower its key interest rate twice in the past year ā dropping it to 4.75% from 5.25%. And those newer, lower mortgage rates gave Britainās house prices a mild boost. They rose at an annual pace of 2.9% in September ā a bit swifter than Augustās 2.7%. The cost of renting, meanwhile, climbed 8.7%. See, a shortage of new homes ā relative to demand ā has helped keep prices climbing. And that might not change anytime soon: the UKās housing minister said the governmentās goal of building 1.5 million homes in the next five years looks unattainable. |