Breaking: UK annualized inflation jumps to 11.1% in October vs.10.7% expected

The UK annualized Consumer Prices Index (CPI) came in at 11.1% in October when compared to 10.1% recorded in September while beating estimates of a 10.7% figure, the UK Office for National Statistics (ONS) reported on Wednesday. The index rose to its highest level since October 1981.

Meanwhile, the core inflation gauge (excluding volatile food and energy items) rose 6.5% YoY last month versus 6.5% seen in September, beating the forecasts of 6.4%.

The monthly figures showed that the UK consumer prices accelerated by 2.0% in October vs. 1.7% expectations and 0.5% previous.

The UK Retail Price Index for October arrived at 2.5% MoM and 14.2% YoY, outpacing estimates across the time horizon.

Additional takeaways (via ONS)

UK Oct Core CPI ex-energy, food, alcohol and tobacco 0.7% MoM.

Without energy price guarantee, CPI inflation would have been around 13.8% in Oct.

Food and non-alcolholic beverage CPI inflation highest since 1977.

FX implications

In an initial reaction to the UK CPI numbers, the GBP/USD pair jumped nearly 20 pips to test the 1.1900 barrier.

The pair was last seen trading at 1.1882, up 0.18% on the day. The US dollar holds steady in the early European morning.

Why UK inflation matters to traders?

The Bank of England (BOE) is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.