Core consumer inflation in Tokyo, considered a leading indicator of nationwide trends, unexpectedly accelerated in October ¡ª a sign of broadening price pressures that may keep alive expectations of near-term end to ultralow interest rates.

The data reinforces expectations the Bank of Japan (BOJ) will revise up its inflation forecasts when it produces fresh quarterly projections at next week¡¯s policy meeting.

The Tokyo core consumer price index (CPI), which excludes volatile fresh food but includes fuel costs, rose 2.7% in October from a year earlier, government data showed on Friday, exceeding market forecasts for a 2.5% gain.

The increase, which was faster than a 2.5% gain in September, casts doubt on the central bank¡¯s view that inflation will slow in coming months as cost-push pressure dissipate.

The so-called ¡°core core¡± index that strips away both fresh food and fuel prices ¡ª closely watched by the BOJ as a gauge of broader price trends ¡ª rose 3.8% in October from a year earlier after a 3.9% increase in September, the data showed.

Services prices rose 2.1% year-on-year in October, faster than a 1.9% gain in September, suggesting that prospects of higher wages could broaden inflationary pressure beyond goods.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, said the jump in inflation was ¡°consistent with our view that inflation will only fall below the BOJ¡¯s 2% target by the end of 2024.¡±

¡°With services inflation continuing to accelerate, it will take a long time before inflation falls back below the BOJ¡¯s 2% target.¡±

The BOJ remains a global dovish outlier, having maintained ultraloose policy even as major central banks elsewhere raised interest rates aggressively to fight rampant inflation.

While inflation has exceeded its 2% inflation target for more than a year, the BOJ has pledged to keep ultralow interest rates until the recent cost-driven price rises shift to a more durable increase driven by domestic demand.

Aside from creeping inflation, a recent surge in global interest rates is heightening pressure on the BOJ to tweak its bond yield control next week, with a hike to an existing yield cap set just three months ago being discussed as a possibility, sources have said.