UK inflation rises to 2.6% in November, in line with expectations

LONDON — U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, marking the second straight monthly increase in the headline figure.

The reading was in-line with the forecast of economists polled by Reuters, and climbed from 2.3% in October.

Inflation hit a three-and-a-half year low of 1.7% in September, but was expected to tick higher in the following months, partly due to an increase in the regulator-set energy price cap this winter.

Persistent inflation in the services sector, the dominant part of the U.K. economy, has led money markets to price in almost no chance of an interest rate cut during the Bank of England’s final meeting of the year on Thursday. Those bets were solidified earlier this week when the ONS reported that regular wage growth strengthened to 5.2% over the August-October period, up from 4.9% over July-September.

If the BOE leaves monetary policy unchanged in December, it will finish out the year with just two cuts of its key rate, bringing it from 5.25% to 4.75%. The European Central Bank has meanwhile enacted four quarter-percentage-point cuts and this month signaled a firm intention to move lower next year.

The U.S. Federal Reserve is widely expected to trim rates by a quarter point at its own meeting on Wednesday, taking total cuts of the year to a full percentage point. Some skepticism lingers over whether it should take this step, given inflationary pressures.

This is a breaking news story and will be updated shortly.