* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv (Adds quote, updates rate and first paragraph)

LONDON, Sept 15 (Reuters) – Sterling edged up on Wednesday after data showed British inflation hit a more than nine-year high last month, fuelling expectations the Bank of England could act sooner to hike rates.

Consumer prices in Britain rose by 3.2% in annual terms last month, the biggest monthly jump in the annual rate in at least 24 years, largely due to a one-off boost reflecting the “Eat Out to Help Out” scheme that pushed down restaurant meal prices last year.

The BoE expects inflation to rise sharply this year and hit a peak of 4%. The strong reading for inflation could reinforce expectations that the BoE is set to tighten monetary policy quicker than the European Central Bank or the U.S. Federal Reserve.

“The strength of the August UK CPI inflation data is fanning expectations that the BoE may take a slightly hawkish bias at next week’s policy meeting,” said Jane Foley, head of FX strategy at Rabobank.

Hugh Gimber, global market strategist at J.P. Morgan Asset Management added that “with inflation running hot and wages on the rise, the Bank looks quite likely to be one of the first major central banks to hike rates next year”.

A poll from Reuters found that investors believed the BoE would raise borrowing costs by the end of 2022.

But the latest numbers brought forward these expectations to mid-2022, said Stuart Cole, head macroeconomist at Equiti Capital. This “explains the support sterling is seeing at the moment”.

Even taking into account the “Eat Out to Help Out” scheme, “underlying pressures remain strong”, with inflation considerably above the BoE’s 2% mandated target, Cole said.

Sterling rose 0.2% versus the dollar at $1.3832 by 1450 GMT, but it was off the 5-week high of $1.39.13 against the dollar touched on Tuesday.

Versus the euro, the pound rose 0.15% to 85.39 pence, off the 3-week high of the previous session.

Sterling has gained support this week from data showing the total number of payrolled employees in Britain has climbed to pre-pandemic levels, and by data pointing that U.S. underlying consumer prices increased at their slowest pace in six months in August. (Reporting by Joice Alves; Editing by Andrew Cawthorne and Alex Richardson)

Read More