Hikes to interest rates are seen to have been pushed farther away after a report revealed that Britain’s inflation fell to a five year low last month.
The UK’s annual consumer price index fell to 1.2% in September from the 1.5% of August, a larger decline than what was expected by economists. Contributing to the dampened rise in prices were the cuts in food prices and the decline in the costs of core goods and services, which fell to the lowest since April 2009.
The report is expected to push back the Bank of England’s (BoE) schedule for the first interest rate increase since 2009 to after next year’s election in May at the earliest. For the majority of the monetary policy committee members at the central bank who voted no to any hikes last month, the depressed inflation rate provides another reason to hold back from starting to raise rates.
Capital Economics’ economist Samuel Tombs claims that inflation will continue to face downward pressure thanks to the ongoing decline in oil prices and the plans of utility companies to freeze their prices. He said that, “Accordingly, CPI inflation looks set to dip below 1 per cent later this year, forcing Mark Carney to write his first letter to the chancellor explaining why inflation is more than 1 per cent adrift from its target.”
The BoE is targeting an inflation rate of 2%, which it has missed for the past nine months.
The material has been provided by InstaForex Company – www.instaforex.com
Hikes to interest rates are seen to have been pushed farther away after a report revealed that Britain’s inflation fell to a five year low last month.
The UK’s annual consumer price index fell to 1.2% in September from the 1.5% of August, a larger decline than what was expected by economists. Contributing to the dampened rise in prices were the cuts in food prices and the decline in the costs of core goods and services, which fell to the lowest since April 2009.
The report is expected to push back the Bank of England’s (BoE) schedule for the first interest rate increase since 2009 to after next year’s election in May at the earliest. For the majority of the monetary policy committee members at the central bank who voted no to any hikes last month, the depressed inflation rate provides another reason to hold back from starting to raise rates.
Capital Economics’ economist Samuel Tombs claims that inflation will continue to face downward pressure thanks to the ongoing decline in oil prices and the plans of utility companies to freeze their prices. He said that, “Accordingly, CPI inflation looks set to dip below 1 per cent later this year, forcing Mark Carney to write his first letter to the chancellor explaining why inflation is more than 1 per cent adrift from its target.”
The BoE is targeting an inflation rate of 2%, which it has missed for the past nine months.
The material has been provided by InstaForex Company – www.instaforex.com
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