Sterling edges up after UK inflation soars to nearly 30-year high

LONDON: Sterling edged up versus the dollar and euro on Wednesday after data showed inflation in Britain at a nearly 30-year high, reinforcing expectations the Bank of England will further hike interest rates.

The annual rate of consumer price inflation rose to 5.5% in January, the highest since March 1992, and above expectations from economists for it to hold at December’s 5.4%.

Wider markets remained jittery about the threat of Russia invading Ukraine. The United States and NATO said Russia was still building up troops around Ukraine on Wednesday despite Moscow’s insistence it was pulling back.

Soaring inflation across many global economies has sparked a debate about how fast central banks should rein in stimulus deployed earlier in the COVID-19 pandemic to prop up businesses and consumers.

The BoE has already raised interest rates twice since December - lifting rates to 0.5% from 0.1% - and financial markets expect a further rate rise to 0.75% or 1% on March 17 after the BoE’s next meeting.

“As we have come to expect the (inflation) data was stronger than the consensus. However, the beat was marginal,” said currency analysts at MUFG in a note.

“It won’t change BoE expectations over coming meetings and hence GBP impact should also be minimal.” Sterling was last up 0.2% versus the dollar at $1.35720.

Against the euro, the pound was also up 0.2% at 83.71 pence per euro.