London pre-open: Stocks seen muted as UK inflation stays at 8.7%

London stocks were set for a muted open on Wednesday as investors mulled the latest UK inflation data ahead of this week’s Bank of England rate announcement.

The FTSE 100 was called to open four points higher at 7,573.

Figures out earlier from the Office for National Statistics showed that consumer price inflation remained at 8.7% in May, coming in above expectations for a decline to 8.4% and putting pressure on the BoE to keep hiking rates.

Meanwhile, core inflation- which stripes out elements such as food and energy - rose to 7.1% from 6.8% in April, hitting its highest level since 1992. Analysts were expecting it to be unchanged.

Capital Economics said the rise in inflation "increases the chances that the Bank raises interest rates by 50 basis points tomorrow rather than the 25bps rise from 4.50% to 4.75% we are forecasting".

"Either way, the acceleration in core inflation leaves the UK looking increasingly like the global outlier and the ‘stagflation nation’," said chief UK economist Paul Dales.

Pantheon Macroeconomics said: "May’s CPI figures ratchet up the pressure on the MPC to increase Bank Rate substantially further over the coming months, though we still think the Committee will keep to a 25bp increase tomorrow, rather than switch back to a 50bp hike.

In corporate news, housebuilder Berkeley Group posted a 9.5% jump in full-year pre-tax profit to £604m as it hailed a "strong operating performance in a challenging environment".