UK interest rate rise likely as inflation hits 3%

Speculation rife Bank of England may raise rate for first time in a decade as governor Mark Carney predicts prices will rise further

The prospect of Britain's first interest rate increase in more than a decade loomed large on Tuesday after inflation hit its highest level since 2012 and the Bank of England governor, Mark Carney, said it had further to rise.

Financial markets are now betting strongly on Threadneedle Street's monetary policy committee reversing the quarter-point cut in borrowing costs made in the aftermath of last year's Brexit vote after the annual increase in the cost of living edged up from 2.9 to 3%.

Inflation is when prices rise. Deflation is the opposite - price decreases over time - but inflation is far more common.

Related: UK inflation rate hits five-year high of 3% - business live