UK Inflation Rises to Five-Month High as Markets Await BoE Decision

The UK's headline consumer price index rose to 3.1% in August, its highest level since March, while core inflation held steady at 2.6%, according to official figures.

Economists say this data continues to show few signs of a broader increase in prices that indicates a risk of persisting inflation after the energy price shock fades.

The British pound remained little changed against the dollar and euro, trading near recent lows ahead of the Bank of England's expected rate-hold decision on Thursday.

Markets are pricing in around a 20% chance of a quarter-point interest rate hike to 4%, but expect tightening fully priced for November, contingent on energy-related inflation fading and core inflation remaining contained.