British inflation jumps to five-year peak in September

Britain's annual inflation rate remained at 3.0 percent in January, holding near to a six-year peak, official data showed (AFP Photo/Daniel LEAL-OLIVAS) (AFP/File)

London (AFP) - Britain's annual inflation rate accelerated in September to the highest level in more than five years, lifted by rising commodity, food and transport prices, official data showed Tuesday.

Inflation has soared this year as the Brexit-hit pound ramped up import costs, placing household budgets under intense strain as wage growth has failed to keep pace with rising consumer prices.

The Consumer Prices Index (CPI) 12-month rate climbed to 3.0 percent last month compared to 2.9 percent in August, the Office for National Statistics (ONS) said in a statement.

The September reading -- which was in line with market expectations -- increases the likelihood of Bank of England policymakers raising interest rates at their next meeting in November.

The last time the rate hit 3.0 percent was in April 2012, while it was last higher in March of the same year when it surged to 3.5 percent.

"The latest headline figures were boosted by a pick-up in fuel costs as pump prices respond to the recent increase in oil prices," noted ING economist James Smith.

"But more importantly, it is clear that the impact of the pound's post-Brexit plunge is still very much at play.

"Food prices, which are highly influenced by import costs, increased sharply."

The pound tumbled in value following last year's shock EU exit referendum. Britain is on course to leave the bloc in March 2019.

Smith added: "Whilst we think a November rate hike is highly likely, for now we think the lack of domestically generated inflation combined with a sluggish growth outlook -- and do not forget all the noise surrounding Brexit -- mean that any subsequent tightening is likely to be very limited."

Bank of England governor Mark Carney warned that inflation would likely surge even higher.

Carney, speaking before a parliamentary committee, said BoE policymakers believed an interest rate hike may be needed over the coming months to tackle surging inflation caused by the weak pound.

"Inflation rising potentially above the 3.0-percent level in the coming months is something we have anticipated," the governor told lawmakers.

The BoE's key task is to keep annual inflation close to a 2.0-percent target.

The central bank's Monetary Policy Committee voted 7-2 to hold the BoE's main rate at a record-low 0.25 percent at their last gathering in September.

Two members felt that a quarter-point hike should occur immediately, against a backdrop of soaring inflation.