Sterling’s Rise May be Limited as High Inflation Could Upset Policy Credibility

0801 GMT – The Bank of England will inevitably raise interest rates again in June and potentially in August after Wednesday’s higher-than-forecast U.K. inflation data but sterling’s gains may be limited, MUFG Bank says. Higher rates should support sterling but the “scale of divergence on the inflation path risks undermining policy credibility and force rate hikes into weakening U.K. and global growth is a possible scenario that could also undermine GBP performance,” MUFG analyst Derek Halpenny says in a note. April’s “terrible” inflation print sets the U.K. apart from other major economies in having a more serious inflation problem, he says. GBP/USD rises 0.1% to 1.2433 and EUR/GBP falls 0.1% to 0.8671 after briefly hitting a five-month low of 0.8650 following the data. (renae.dyer@wsj.com)