U.K. inflation hit 2.9% in May, the fastest rate in four years, as consumer prices continue to run much higher than the Bank of England’s target. Tuesday’s reading from the Office for National Statistics was above the 2.7% estimate from a FactSet consensus survey, as energy and food prices increased. The Bank of England’s inflation target is 2%. Core inflation, which excludes volatile energy and food prices, was 2.6%, above expectations of 2.4%. The central bank has warned it expects inflation to peak just below 3% in the fourth quarter, largely because of the drop in the pound’s value. “The balance of probability suggests the Bank will continue to ‘look through’ higher inflation and leave rates on hold to support the economy, but if inflation continues to surprise we could start to see members revising their positions,” said Ben Brettell, senior economist at Hargreaves Lansdown, in a note. The Bank of England will meet Thursday. The pound climbed to $1.2717 after the release, rising above the $1.27 handle.
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