Unexpected comeback

UK inflation makes unexpected comeback, jumps to 10.4 percent

News increases chance of rate hike on Thursday.

BY JOHANNA TREECK

After three months of small drops, Britain's inflation jumped in February, defying expectations and raising pressure on the Bank of England to increase interest rates, data released by the Office for National Statistics showed Wednesday.

The consumer price index rose by 10.4 percent in February, up from 10.1 percent in January.

According to a Reuters poll ahead of the release, analysts had expected the U.K. to leave double-digit inflation levels behind, forecasting a decline to 9.9 percent. The U.K.'s inflation had peaked at 11.1 percent in October last year.

The Bank of England is due to announce it next interest rate decision Thursday. Analysts had expected another rise in interest rates, but recent turmoil in financial markets sparked speculation that policymakers may hold rates. But the unexpected jump in inflation may now tip the balance in favor of further tightening of interest rates.