The dollar climbed to a six-week peak against a currency basket after the release of hotter-than-expected U.S. retail sales data on Wednesday, bolstering investors’ expectations that the Federal Reserve would keep monetary policy tight for some time to fight stubbornly high inflation.

The greenback also ascended to a fresh six-week peak versus the yen.

Data showed that U.S. retail sales surged 3.0% last month, increasing by the most in nearly two years. The numbers for December were unrevised to show sales dropping 1.1%. Economists polled by Reuters had forecast sales would increase 1.8%, with estimates ranging from 0.5% to 3.0%.

On Tuesday, the U.S. government reported that consumer prices accelerated on a monthly basis in January, rising 0.5%, due in part to higher rental and food costs. The gain matched economists’ expectations in a Reuters poll and was well above the 0.1% month-on-month rise in December. Year-on-year prices rose 6.4%, down from 6.5% in December but above economists’ expectations of a 6.2% gain.

“What all this has done, is it’s pushed that terminal rate, just 25 basis points higher than in January. So, now, the terminal rate has been pushed to about 5.25,” said Ivan Asensio, head of FX at Silicon Valley Bank in San Francisco, referring to the U.S. central bank’s benchmark overnight interest rate.

“It’s not just that we have renewed expectations for now 25 (basis points higher) in March and then 25 as expected in May, but also the possibility that rates have to stay higher for longer. So, where is the plateau? Every day that goes by, the 2% (inflation) target for the Fed seems a bit far into the distance,” he added.

In afternoon trading, the dollar index rose 0.61% to 103.86, after hitting a six-week peak of 104.11.

Against the yen, the dollar surged to 134.355 yen, the highest since Jan. 6. It was last unchanged at 134.11 yen.

The currency pair’s consolidation around 127 has extended, wrote Shaun Osborne, chief FX strategist, at Scotiabank, and the technical picture for the U.S. dollar has developed more positively through February so far.”

He added that U.S. dollar gains above the 133.10 yen zone suggest additional, corrective gains to the 136.50/137 area will follow.

The euro, meanwhile, fell 0.01% against the dollar to 1.0688.

In December, Fed policymakers’ median projection saw the central bank’s policy rate peaking at 5.1% this year. But interest rate futures markets have priced a peak above 5.2% hitting in July, and traders are becoming less sure that cuts are coming in 2023. Rates currently stand at 4.5% to 4.75%.

Deutsche Bank economists said they now expect the Fed to raise the policy rate to as high as 5.6%, having previously expected a 5.1% peak.

Sterling was 0.01% to $1.2027 in the wake of data showing British inflation cooled more than expected in January to an annual rate of 10.1%, alleviating some of the pressure on the Bank of England to keep hiking interest rates.

Also on investors’ radars was an announcement by Scottish First Minister Nicola Sturgeon that she would step down after more than eight years in the job.