UPDATE 2-Sterling climbs after inflation data turns heat up on BoE

(Adds fresh quote, updates latest prices) LONDON, March 22 (Reuters) - Sterling jumped on Wednesday after data showed UK price pressures picked up a lot more than expected in February, including inflation that excludes food and energy, raising the chances of another rate rise this week from the Bank of England. British consumer price inflation (CPI) unexpectedly rose to 10.4% in February from January's 10.1%, figures from the Office for National Statistics showed on Wednesday. Economists polled by Reuters had forecast the annual CPI rate would drop to 9.9% in February. The pound climbed during morning trading and by 1150 GMT was up 0.4% against the dollar at $1.2269, from a 0.1% gain prior to the data. The euro fell 0.2% against the pound to 87.96 pence, from 88.00 pence earlier. "The inflation data is definitely significantly increasing the likelihood that we see a rate hike tomorrow. It was a very high number," said Francesco Pesole, FX strategist at ING.

Money markets show a 93% chance the Bank of England (BoE)
will raise rates by a quarter point when it meets on Thursday, up from around 57% on Tuesday. The core CPI, which excludes energy, food, alcohol and tobacco and is watched closed by the BoE, rose to 6.2% from 5.8% in January, versus a forecast decline to 5.7%. The annual inflation rate in the services sector, which most policymakers consider a good measure of underlying price pressures, rose to 6.6% from 6.0% in January. The pound has risen by 2% against the dollar so far in March, partly reversing some of February's 2.43% drop. But it's struggling to make much headway, given traders widely expect the BoE to make this week's rate decision the last hike for now. "The Bank of England will need to see more evidence on the wage and jobs side to conclude that more tightening is required beyond tomorrow," said Pesole.

At over 10%, the rate of inflation is more than five times the BoE's target rate of 2% and the highest among the Group of Seven richest nations. "One other thing that we also know about inflation in the UK is that it goes up quickly and comes down slowly, and with wage inflation also rising it is likely to remain sticky," CMC Markets strategist Michael Hewson said.
(Reporting by Lucy Raitano and Amanda Cooper; Editing by Mark Potter and Bernadette Baum)

Reuters

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UPDATE 2-Sterling climbs after inflation data turns heat up on BoE

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