U.K. CPI rose 0.7% in June, bringing the annualized rate to 3.8%-the fastest pace in eleven years. Rising food and energy costs pushed prices to the highest levels on record, and oil at $147 per barrel, will keep them elevated. Indeed, BoE Governor King expects that inflation will rise above 4% and maintain those levels until next year. Looking at the breakdown food prices expectedly rose another 2.2% in June, but a 3.9% rise in household goods shows that rising costs are filtering throughout the broader economy. Governor King will have to write another letter of explanation to Chancellor Darling if inflation still exceeds 3% in July, as he did last month. The country’s housing slump which is approaching the worst levels since the Great Depression is dragging the economy towards a recession and will make it prohibitive for the central bank to raise rates in an attempt to bring inflation back towards its 2% target. Therefore, expectations are the MPC will leave rates unchanged for the remainder of the year. – [I]John Rivera, Currency Analyst[/I]