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UK Inflation Falls More Than Expected Rate Hike Unlikely

The annual rate of UK inflation rate fell more than expected in July as the cost of clothing, footwear, food and non-alcoholic drinks eased.

The Office for National Statistics (ONS) said Consumer Price Index (CPI) inflation fell to 1.6% from 1.9% a month earlier.

But CPI remains well above average wages which grew by just 0.6% in the three months to June.

The Retail Prices Index, which includes housing costs, fell to 2.5% from 2.6%.

Economists had expected CPI inflation to fall to 1.8% in July.

The ONS said consumer price inflation for the three months to the end of July was 1.7%.

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

The pound fell against both the dollar – hitting its lowest point against the dollar since April – and the euro following the release of the inflation figures.

Last week, Bank policymaker Professor David Miles told the BBC he believed inflation was likely to remain below target for some time to come.

He added that this was a “very good news” as it meant the Bank was not “going to be pushed into raising interest rates sharply or immediately because the inflation outlook remains pretty subdued”.

via BBC [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
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