Closing summary
Our main story today: UK inflation has risen to a near-30-year high of 5.4%, driven higher by rising prices for food, furniture, clothes and housing costs. This deepens the country’s cost of living crisis, and heaps pressure on the Bank of England to raise interest rates at its next meeting in February, following December’s surprise hike.
Sterling rose 0.8% against the dollar to $1.3837 after the data, and was also supported by the surge in UK bond yields. The two-year gilt yield rose to its highest level since March 2018.
Crude oil prices are up for a fourth day and hit seven-year highs, after a fire on a pipeline from Iraq to Turkey briefly halted oil flows, raising fears about supply. Brent crude touched $89.05 a barrel, its highest level since October 2014 while US light crude climbed as high as $87.08, also the highest since then.
The explosion that set off the fire on the pipeline in the southeastern Turkish province of Kahramanmaras was caused by a falling power pylon, not an attack, a senior security source told Reuters.
European stock markets are trading between 0.2% (Italy) and 1% (France) higher. On Wall Street, US stock indices were boosted by upbeat results from a spate of companies such the consumer giant Procter & Gamble and the banks Bank of America and Morgan Stanley, which wrapped up the bank earnings season.
Our other stories are:
BOE's Bailey: Rising inflation could hit demand and push up unemployment
The Bank of England governor also said that rising inflation could hit demand and push up unemployment, ultimately bringing down price growth.
This is a hard thing to say... but if you get pressure on cost of living, pressure on real earnings, that will tend to restrain demand in the economy... and that could lead to an output gap opening up, and it could eventually of course lead to higher unemployment and that would bring inflation down.
I don’t want to suggest that... were we to consider it necessary, we don’t have to take any action in terms of the Bank of England’s action on interest rates. We would obviously judge that ourselves. But there is another channel there which would weaken demand in the economy.
