UK inflation doves are looking foolish right now (I have been blogging about this issue for a while). We are starting to see secular, global evidence of rising price pressures after a prolonged period of near zero official policy interest rates. This will give the RBA a lot of pause. Australia will start importing inflation in addition to our internally generated price pressures. Dow Jones reports:
"LONDON (Dow Jones)--U.K. consumer price inflation accelerated sharply in December, underscoring the view that the Bank of England's most likely next move will be to tighten policy, despite the economy's continuing fragility.
Data from the Office for National Statistics Tuesday showed annual inflation jumped to 3.7% last month from 3.3% in November, well above expectations as economists polled by Dow Jones Newswires had forecast a figure of 3.4%.
The CPI annual rate has now been at least a percentage point above the BOE's 2.0% target for a whole year. December's rate was the joint strongest since November 2008.
In monthly terms, consumer prices rose 1.0% in December, well above the 0.4% rate in November and the largest increase since records began in 1996. Economists had forecast a 0.7% gain.
This month, the BOE's Monetary Policy Committee voted to keep bond purchases under its quantitative easing program at GBP200 billion and maintain its key interest rate at 0.5%.
But opinion has been divided at recent meetings, illustrating the difficulty of the choices that the central bank faces, with Andrew Sentance calling for an immediate rate rise, and Adam Posen for more bond purchases."
