Commenting on the market reaction to UK CPI beating expectations last week, Shane O'Neill, head of interest rate trading for Validus Risk Management, said: “UK CPI inflation came in at 4.2% versus 3.9% expected, up from 3.1% previously. This higher-than-expected print will give the Bank of England incentive to increase rates at their next meeting in December.

“They disappointed markets in November by holding off on a rate hike despite it being fully priced in – citing slowing demand and growth concerns – critics at the time suggested that the Bank was not acting to curb runaway inflation and this print will go some way to validate these critics. “After the strong employment data, the missing piece of the puzzle according to Governor Bailey, there is seemingly little reason to expect the Bank not to hike, though this thinking has scuppered traders before. If the first post-furlough employment data point, released shortly before the Bank’s December meeting, confirms the strength of the employment market and inflation, as seen today, continues higher - it is going to look more and more like the Bank missed an opportunity in November.”