To rein in CPI, govt needs to be vigilant on food inflation

UK wage growth disappoints despite record low unemployment

The UK's inflation rate climbed to its highest level in more than five years in August as the price of petrol and clothing rose.

According to the Office for National Statistics (ONS), clothing prices rose faster than past year, which coupled with a hike in the cost of petrol, pushed inflation higher.

Ahead of the latest Bank of England Monetary Policy Committee meeting on Thursday, the latest Office for National Statistics numbers for United Kingdom inflation should attract attention on Tuesday, although undoubtedly the launch of Apple Inc's (NASDAQ:AAPL) will see the most interest.

GBP/USD traded above 1.32600 on the release of higher than expected United Kingdom inflation data, putting pressure on the United Kingdom central bank to temper price rises.

The weaker level of the pound was behind the continued rise in clothing prices, as it's become more expensive for importers to bring clothing to the United Kingdom from overseas.

The year-on-year increase in output prices strengthened to 3.4% from 3.1%.

A broader calculation of the CPI, which includes housing costs, also rose at a faster pace in August than July.

They showed an annual rate of 3.4% - their first increase since February - while prices paid by factories for materials and energy were up 7.4%.

"With the repo rate at 6 percent and the CPI inflation expected to average 3.7 percent in 2017-18, there may be room for further monetary easing", Aditi Nayar, Principal Economist at ratings agency ICRA said.

The data helped sterling to its highest level against the dollar for nearly a year - trading at $1.3267 - while it also surged against the euro. "Economists have suggested that now is finally the time that the Bank takes a more hawkish turn, after eight and a half years of ultra-loose policy", said Maike Currie, investment director for personal investing at Fidelity International.

The latest data beat expectations of a gain to 2.8 percent, according to analysts' consensus forecast.

TUC general secretary Frances O'Grady said: "The cost of living squeeze continues, with rising inflation outpacing wages".

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