Retail inflation rises to 3.36% in August, industrial production increases in July

Retail prices are seen rising as demand picks up ahead of festive season among other reasons

The jump was large led by a sharp rise in clothing prices in August, with inflation for clothing and footwear reaching 4.6 per cent, its highest levels since the Thatcher era.

Inflation rose to 2.36 percent in July, after consistently falling for three straight months.

Consumer inflation rose to a five-month high of 3.36 per cent in August on the back of higher food and fuel prices.

Inflation rose in both Britain and the EU overall, with increasing global commodity prices thought to be partly responsible, although the United Kingdom rate is higher than in all the larger western European nations.

A broader calculation of the CPI, which includes housing costs, also rose at a faster pace in August than July. Consumer inflation was 2.36 per cent in the previous month (July). The MPC will announce its latest interest rate decision on Thursday, which is broadly anticipated to see rates remain on hold at 0.25%. With the rate of inflation rising sharply, investors are likely anticipating the UK's first interest rate hike in a decade, could come sooner than expected.

The pound hit a one-year high against the dollar after official data showed United Kingdom inflation was higher than expected in August.

However sterling hit a year-high at $1.3282 in the wake of Tuesday's data, as traders bet on the timing of rate tightening from the Bank of England.

"The inflation rate for a range of goods has picked up since a year ago and the overall rate in the United Kingdom is higher than in most other EU countries, including all of the larger western European nations". The cumulative CPI inflation was lower at 2.47% in April-August FY2018 compared with 5.62% in April-August FY2017.

That detail, combined with an uncertain economic outlook, makes the BOE's job much harder than just balancing the level of inflation.

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