UK CPI for the month of August came out at 2.9% vs 2.8% forecast and 2.6% previous reading.

Inflation in UK is clearly rising on the back of a weaker Pound, which is still extremely far from pre-Brexit levels. Last time that inflation was so high in the UK, Interest rates were at 0.5% (July 2013).

This represents a challenge for BoE since inflation is picking up on the back of weaker currency, but wages (even if growing at 2.1%) are not able to keep up with inflation growth rate.

Tomorrow BoE will release its Average Earnings Index which at this point is a key indicator to predict the next move for BoE. A rate increase by year end is now priced with 34.7% chance compared with 24.5% we had yesterday.