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:
- clothing and footwear are very volatile components
- inflation should rise due to the recent fall in GBP
- Producer Price Index went in line with expectations and was consistent with weaker GBP passing through into CPI
- 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.