British consumer prices increased at the fastest pace in more than five years in September, led by a weaker pound, adding to the likelihood of a rate hike as early as the next month. Driven by food and transport prices, inflation rose to 3 percent in September from 2.9 percent in August, data from the Office for National Statistics showed Tuesday.

The rate came in line with economists' expectations. The figure was last higher in March 2012.

Month-on-month, consumer prices gained 0.3 percent in September, as expected.

Meanwhile, core inflation that excludes energy, food, alcoholic beverages and tobacco, held steady at 2.7 percent.

Data showed that the consumer price index including owner occupiers' housing costs (CPIH) climbed 2.8 percent year-on-year in September versus 2.7 percent in August.

ONS Head of Inflation Mike Prestwood said, "Food prices and a range of transport costs helped to push up inflation in September."

"These effects were partly offset by clothing prices that rose less strongly than this time last year," he added.

At the Treasury Committee hearing on Tuesday, Bank of England Governor Mark Carney said, "Inflation rising potentially above the 3 percent level in the coming months is something we have anticipated."

He said it is more likely than not that he will write an open letter to Chancellor Philip Hammond, explaining why inflation exceeded the target by one percentage point.

The BoE is set to publish its next Inflation Report with the MPC decision on November 2.

Further, Carney said the monetary policy is stimulative and fiscal policy is restrictive. He also said that the UK faces a variety of headwinds.

Today's data are consistent with the assessment that the Monetary Policy Committee will raise interest rates in November, but it won't be panicked into doing so by concerns about inflation, Paul Hollingsworth, an economist at Capital Economics, said.

The EY ITEM Club on Monday urged the BoE to hold off from lifting the interest rate until economic prospects look brighter and there is greater certainty over the Brexit transition arrangement.

Output price inflation slowed slightly to 3.3 percent, as expected, from 3.4 percent in August, the ONS said in a separate report on Tuesday.

On a monthly basis, output prices rose only 0.2 percent after climbing 0.4 percent.

At the same time, annual growth in input prices remained at 8.4 percent. Meanwhile, monthly input price inflation eased notably to 0.4 percent from 2.3 percent.

UK house price inflation rose to 5.0 percent in August from 4.5 percent in July. Moreover, the latest rate of growth was the highest since December 2016, when prices had risen 5.2 percent.

Measures of domestically generated inflation are consistent with there still being some slack in the economy, BoE's newly appointed deputy governor Dave Ramsden told lawmakers.

"They generally remain a little below levels consistent with the 2 percent target," he added.

"Despite continued robust growth in employment there is no sign of second round effects onto wages from higher recent inflation," Ramsden said.

Ramsden pointed out the risk of Brexit uncertainty weighing on business investment, causing it to could turn out weaker than the central forecast of BoE.

If this were to happen then business investment growth would not compensate for sluggish consumption growth, he added.

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