Sterling Pound Rises to Three-year High after Faster-than-expected Inflation in UK

The sterling pound rose 0.58% on Wednesday to $1.347, its highest level since February 2022, though it was broadly stable against the euro, trading at 84.325 pence.

This was driven by faster-than-expected UK consumer price inflation in April, reducing the Bank of England's ability to cut interest rates quickly to protect growth.

The Office for National Statistics announced that consumer prices rose by 3.5 percent in April, up from 2.6% in March. This is the highest level since January 2024 and the largest increase since 2022, when inflation was rising sharply.

British Chancellor Rachel Reeves said she was "disappointed" with the data, saying in a statement: "I know that cost-of-living pressures continue to weigh heavily on working people."

There were expectations of a sharp rise in prices last month, driven by increases in water, gas, and electricity bills.

The Office for National Statistics said higher airfares contributed to the higher data.

Worryingly, services inflation, which measures domestic price pressures, rose by 5.4% in April, exceeding even the highest forecast in a Reuters poll of 4.8% and exceeding the BoE's 5 percent forecast last month.

Wednesday's data will increase concerns among Monetary Policy Committee members about the outlook for the UK economy, which grew strongly in early 2025 but is likely to slow in the second half of the year.