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U.K. Inflation Options Rise Ahead of Brexit Referendum: Chart

The cost to protect against U.K. inflation exceeding 2 percent in two years has surged from multi-year lows seen in February due to the delayed effect of the pound’s recent weakness. The sterling traded at a seven-year low against the dollar earlier this year as uncertainty surrounding the U.K. referendum on European Union membership grew. Even as the pound has recovered most of this year’s losses and six-month volatility has come down from a near six-year high in April, the premium demanded for protection against inflation is now at 135 basis points, well above 57 basis points hit on Feb. 18.

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