The pound weakened versus the dollar and the yen as accelerating U.K. inflation failed to convince investors that the Bank of England will temper its asset- purchase program after it was revived last week. Consumer price gains accelerated to match a record high in September, rising 5.2 percent from a year earlier, compared with 4.5 percent in August, the Office for National Statistics said. The pound gained versus the euro and gilts rose amid concern Europe’s options for overcoming the debt crisis are narrowing after Germany doused expectations of a breakthrough at this weekend’s summit. “In the short term CPI was going to spike but in the long run we still know that the Bank of England believe deflationary forces will remain in place,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “The idea that sterling should have made substantial gains on the premise that people were going to change their views about monetary policy was probably ill-founded. We’re going to remain pretty relaxed on monetary policy for a while.” Sterling declined 0.2 percent to $1.5712 as of 10:24 a.m. in London. It dropped 0.3 percent to 120.59 yen. The pound was 0.2 percent stronger against the euro at 87.06 pence. The U.K. currency has declined 1.2 percent in the past six months, according to Bloomberg Correlation-Weighted Indexes, which measure a basket of 10 developed-market currencies. The 10-year gilt yield slid four basis points, or 0.04 percentage point, to 2.49 percent. The 3.75 percent security maturing September 2021 advanced 0.38, or 3.8 pounds per 1,000- pound ($1,577) face amount, to 110.995. The two-year note yield rose one basis point to 0.61 percent. U.K. government debt has returned 11 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies, surpassing the 6.6 percent gain for German bunds and 8.1 percent for U.S. Treasuries. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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