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Currency analyst

UK inflation reports and Carney’s testimony

The pound dropped to 1.2400 as a report showed UK rate of inflation unexpectedly slowed in October. Annual consumer-price index was 0.9% last month, compared with 1% in September. Despite October's decline in inflation rate Mark Carney, the BOE's governor, still expects inflation to rise saying that:

  1. clothing and footwear are very volatile components
  2. inflation should rise due to the recent fall in GBP
  3. Producer Price Index went in line with expectations and was consistent with weaker GBP passing through into CPI
  4. BOE has limits to tolerance for above-target CPI

Earlier this month BOE’s officials refused to recourse to additional easening and shifted to a neutral policy stance instead. The pound rose as soon as BOE decided to keep its interest rate on hold.

 

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