UK Inflation Drop Easing Pressure on BoE Rate Hike

The annual rate of UK inflation fell in August as the cost of petrol, food and non-alcoholic drinks declined.

Consumer Price Index (CPI) inflation fell to 1.5% from 1.6% in August, the Office for National Statistics said.

It means the Bank of England remains under little pressure to raise interest rates in order to keep CPI inflation at or below its target rate of 2%.

Retail Price Index (RPI) inflation also saw a reduction, to 2.4%, from 2.5% the previous month.

Prices of food and non-alcoholic drinks fell by 1.1%, marking their steepest fall for more than a decade.

An ONS spokesman said competition between rival supermarket chains was a factor. Food prices had also been pushed up by cold weather a year earlier.

Bucking the downward trend, clothing, transport services and alcohol all rose in price faster than the headline inflation rate.

And core inflation, which strips out food, alcohol, tobacco and energy, notched up a 1.9% rate rise.

Low earnings growth
“For all the chatter, guesswork and prophecy around possible rate hikes in the UK, inflation is currently sat at a five-year low,” said Jeremy Cook, chief economist at currency exchange company World First.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza