British inflation hit its joint highest in more than five years in August as households paid more for fuel and clothing, complicating the Bank of England's job this week of explaining why it is not raising interest rates. David Pollard reports.
To spend or not to spend ... UK shoppers face tough choices, but they're not the only ones. New inflation data pushing Bank of England policymakers deeper into a dilemma .... Raise rates and dent consumer confidence even more. Or leave them - and risk further price pressures doing the same. SOUNDBITE (English) CMC Markets, Market Analyst, David Madden, SAYING: "Inflation in the UK ticked up to 2.9 percent. This is probably more to do with the relatively weak British pound. Adding to that wage growth in the UK isn't overly impressive. And the long and short of it is that British consumers don't have the same disposable income they once did say a decade ago." No rate increase at its meeting this week perhaps - as the Bank holds off amid Brexit uncertainty. But pressure could still build to hike for the first time since the global financial crisis. Sterling hitting a four week high against the euro on that belief. SOUNDBITE (English) CITY INDEX MARKET ANALYST, KEN ODELUGA, SAYING: "We are really in the eye of the Brexit storm now or approaching it. If inflation really rockets and seems to be out of control ... if we touch on 3 percent and maybe go a little bit higher this year, we could see quite a different tone from some of the compliant dissenters." For consumers, clothing prices rose on the Brexit effect, as did fuel. Already 2.9 per cent is the highest inflation rate in four years - and way above the Bank's target of two. Other indicators also point to future pressure: at an annual rate of 3.4 per cent, factory gate prices are on the rise. As is the heat on policymakers.