British inflation surged to a five-month high last month and house prices rose at their fastest rate in years, prompting investors to increase bets on an interest rate rise before the end of 2014. Underlining the challenge facing the Bank of England as it tries to manage Britain's accelerating economic recovery, consumer prices rose 1.9 percent on the year in June, official ONS data showed.
The jump from a four-and-a-half-year low of 1.5 percent in May far outstripped forecasts for only a slight rise, according to a Reuters poll of economists. Separate figures showed the real estate market also picked up speed as London property prices leapt by a record 20.1 percent over the 12 months to May.
Speaking after the data - which brought consumer price growth close to the Bank's 2 percent target - BoE Governor Mark Carney said inflation expectations were "extremely well anchored" and had improved over the last year. "I am aware of today's CPI number, but I would only draw attention that in (our) May forecast, inflation returns to target at the end of the forecast horizon, only gets back to 2 percent three years out," Carney told lawmakers.
Consumer price inflation in Britain had been largely declining over the last year, helping the BoE to hold off on raising interest rates despite Britain's surprisingly strong economic recovery. Separate data from the ONS showed house prices in Britain rose 10.5 percent in the year to May. Excluding London and the south east, British house prices rose by 6.4 percent in the 12 months to May, the highest in nearly four years.
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