Forex News – Sterling falls after UK inflation rate lower-than-forecast
July 16, 2013 10:06 am
Sterling fell against the dollar after U.K. inflation numbers misses forecasts on Tuesday, raising expectations that the Bank of England now has more leeway to provide extra stimulus for the economy. This led investors to expect interest rates to remain at record lows for a while longer.
A report from the Office for National Statistics showed the CPI reading in June hit 2.9 percent, up from 2.7 percent in May but lower than the 3.0 that was expected.
The BOE’s target inflation rate is 2 percent, so the recent string of above-target rates means many British people’s incomes are steadily losing purchasing power and this raises questions about how long the signs of economic recovery can last.
Higher petrol and clothing prices are the main driver behind the rise in the rate of inflation.
The slower rate of acceleration in inflation means that the new BOE Governor Mark Carney does not need to write an explanation letter to the Chancellor of the Exchequer George Osborne. Otherwise, Carney would have had to explain why the rate was so far above the central bank’s target of 2 percent.
GBPUSD became volatile after the data and dropped to $1.5053 immediately after the figures at 9:30am London time from where it was a minute before the data at $1.5090.
Sterling fell against the dollar after U.K. inflation numbers misses forecasts on Tuesday, raising expectations that the Bank of England now has more leeway to provide extra stimulus for the economy. This led investors to expect interest rates to remain at record lows for a while longer.
A report from the Office for National Statistics showed the CPI reading in June hit 2.9 percent, up from 2.7 percent in May but lower than the 3.0 that was expected.
The BOE’s target inflation rate is 2 percent, so the recent string of above-target rates means many British people’s incomes are steadily losing purchasing power and this raises questions about how long the signs of economic recovery can last.
Higher petrol and clothing prices are the main driver behind the rise in the rate of inflation.
The slower rate of acceleration in inflation means that the new BOE Governor Mark Carney does not need to write an explanation letter to the Chancellor of the Exchequer George Osborne. Otherwise, Carney would have had to explain why the rate was so far above the central bank’s target of 2 percent.
GBPUSD became volatile after the data and dropped to $1.5053 immediately after the figures at 9:30am London time from where it was a minute before the data at $1.5090.
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