"Everything is moving in the wrong direction for the Bank of England
to perhaps sit quite as comfortably as they otherwise would have done,” said Victoria Clarke, an economist at Investec in London. “Sitting tight on rates is now becoming a bit less comfortable because the global economic backdrop looks to have weakened and some of those forces, those headwinds, are showing no signs of abating."
The yield curve inversion reflects global economic woes as trade tensions weigh on confidence and demand. The US yield curve also inverted on Wednesday, for the first time since 2007, and China, Germany and the euro zone all reported weak data.
BOE policy makers are widely expected to keep interest rates on hold until the nation’s exit from the European Union is resolved. Economists still expect a rate cut if Britain crashes out on Oct. 31 without a deal, though that could require the bank to allow above-target inflation.
The acceleration in consumer-price growth to 2.1 per cent last month was boosted by computer games and hotel accommodation. Economists had expected it to slow to 1.9 per cent.
In another sign of pain, the retail prices index climbed 2.8 per cent. That’s important for rail commuters as regulated fare hikes, which cover around 40 per cent of all fares, are capped based on the July reading. Any increases will come into effect in January.