(Bloomberg) -- U.K. inflation is on the rise again, accelerating more than forecast in August after the biggest surge in clothes prices in almost three decades.
The jump to 2.9 percent from 2.6 percent in July puts the spotlight squarely back on one of the most prominent economic repercussions of the Brexit vote in 2016. The pound has fallen 11 percent against the dollar since the referendum, boosting import costs and feeding through to prices for everyday household items. The annual inflation rate has never been higher since 2012 and helped push Bloomberg’s Brexit barometer to the lowest since June.
The numbers, as well as intensifying a squeeze on households, may put fresh pressure on Bank of England policy makers, who are grappling with price growth above their 2 percent target. While just two of the nine-member Monetary Policy Committee voted to increase interest rates from a record-low 0.25 percent last month, some economists say a third -- Andy Haldane -- could join them at this week’s meeting.
A 6-3 vote “could prompt a re-appraisal of the potential path of interest rates,” said James Knightley, chief international economist at ING in London. “But we feel that the economic uncertainty brought about by Brexit will lead the committee to hold fire until there is much greater clarity on the U.K.’s post Brexit environment.”
The data on Tuesday from the Office for National Statistics also showed that core inflation accelerated more than economists expected last month, reaching the most since 2011. The pound climbed to a one-year high, jumping 0.9 percent to $1.3281 as of 11:46 a.m. London time.
The inflation pickup in August was led by clothing and footwear, which surged 4.6 percent compared with a year earlier. The statistics office said weaker sterling may be partly to blame. with the currency down 14 percent on a trade-weighted basis since the U.K. voted to leave the European Union.
Separate data on Tuesday showed that companies’ input costs rose 1.6 percent in August, the most this year, while output prices rose 0.4 percent.
The pickup in prices this year is hurting consumers and acting as a drag on the economy.
Data Wednesday is projected to show wage growth may have accelerated for a third month in July, though at just above 2 percent, that means workers are still losing out in real terms.
The BOE announces its next policy decision on Thursday. A majority of MPC members will probably vote for no change to the benchmark rate, with inflation concerns tempered by the fact the economy expanded just 0.3 percent in the second quarter, leaving growth the slowest among Group of Seven nations.