Data from the UK yesterday show that inflation is accelerating:
Data from the Office for National Statistics on Monday showed input prices rose by a larger than expected 0.9 percent in December taking the annual rate to 17.2 percent, the highest since records began in 1991.
Or maybe not:
[O]utput prices fell for a third month running, suggesting firms are absorbing rising costs, not passing them on to their customers... [P]rices at the factory gate fell 0.2 percent in December, for a weaker-than-expected annual rate of 2.4 percent...
But in deciding on interest rates, the Bank of England also tries to look at more forward-looking data. From Reuters:
Policymakers need to watch for signals from a range of world asset prices when setting interest rates and should be forward-looking in keeping inflation low and stable, Bank of England Governor Mervyn King said on Monday.
King also said that growth has picked up and inflation has fallen back close to the Bank's 2.0 percent target but he reiterated that remarkable economic stability during the past decade has been less evident over the past year.
In a speech to a business audience in Kent, King cited "remarkably low" long-term real interest rates, which central bankers cannot fully explain and therefore do not know how long will persist, as one factor to watch.
"Monetary policy will, therefore, need to be alert to the information contained in a wide range of asset prices, to be forward-looking in its aim of maintaining low and stable inflation, and be ready to respond to changes in the signposts," he said according to the text of the speech.
No doubt, those asset prices include house prices, which may be picking up again in the UK.
The government said house price inflation rose to 2.5 percent in the year to November from a nine-year low of 1.8 percent the month before...
A separate report from property web site Rightmove said average asking prices on a home edged up 0.1 percent in the period from early December to early January after a...0.8 percent decline in the previous period and took the annual rate of increase to 3.6 percent from 3.4 percent in the previous survey...
The survey also showed that the average number of unsold properties on estate agents' books fell to 61 in December from 65 in November -- the lowest since June 2004, when it was 56.