UK Inflation Continues to Rise, Increasing Pressure for Rate Hike

UK inflation remained higher than expected for a fourth month, with core inflation accelerating unexpectedly to a 31-year high of 7.1%, raising the possibility of the Bank of England opting for a bigger rate increase on Thursday. Traders piled into wagers for more BOE interest-rate hikes, with money market pricing fully priced its key rate hitting 6% by December. The figures raise the specter of the Bank of England raising interest rates to near 6% and driving up the cost of mortgages. A separate report showed government debt now exceeds the size of the UK economy for the first time since 1961, imperiling Prime Minister Rishi Sunak’s promise to restore health to the public finances and cut inflation.