LONDON (Reuters) – UK consumer price inflation slowed less than expected in April and core inflation accelerated to its highest level in 31 years, which could lead the Bank of to raise its key rate further in a month.

The price index was up 8.7% year on year in April, after rising 10.1% in March, data released Wednesday by the National Statistics Office showed.

Economists polled by Reuters on average expected a steeper deceleration, to 8.2%.

Core inflation, which excludes energy, food, alcohol and tobacco prices, hit 6.8% year on year last month – its highest level since March 1992 – from 6 .2% in March and expected by the Reuters consensus.

“With inflation proving to be stronger than the Bank of England expected, it now seems almost certain that the Bank will raise its interest rate by a quarter of a point on June 22 and and perhaps also in months ahead,” said Paul Dales, chief economist at Capital Economics.

According to rate futures, investors are pricing a 100% chance of another 25 basis point rate hike next month, up from 83% on Tuesday.

The BoE fears that the rise in prices, which is impacting the purchasing power of households, will lead to more wage demands and a change in corporate pricing strategies.

The annual rate of food and drink price inflation, which in March reached its highest level since 1977, fell only slightly in April, from 19.2% to 19.1%.

Price growth in the services sector, also closely watched by the BoE to gauge the persistence of inflation, has peaked since 1992.

“While inflation is now in single digits as a positive, food prices continue to rise too rapidly,” Finance Minister Jeremy Hunt said in a statement. “We must resolutely stick to the plan to reduce inflation.”

(Andy Bruce, Laetitia Volga, edited by Kate Entringer and Blandine Hénault)

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