UK inflation jumps to 3.5% — cementing rate hike expectations

Headline consumer inflation in the United Kingdom accelerated to 3.5% year-over-year, driven by persistent services price pressures and rising household energy bills. The hotter-than-expected reading marks a significant divergence from the Bank of England's 2% medium-term target and caught fixed-income desks off guard. British gilt yields climbed across the curve as overnight index swaps priced in a hawkish shift from Monetary Policy Committee policymakers. Sterling strengthened against major peers on expectations of wider interest rate differentials versus the eurozone. UK domestic equities and rate-sensitive homebuilders came under pressure as investors reassessed borrowing cost trajectories.