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Sterling (GBP) weakened against most major currencies on Thursday despite traders doubting whether the Bank of England will cut interest rates again at its December meeting. UK consumer price index (CPI) data for October released on Wednesday showed that rising price pressures accelerated faster than expected, weakening market speculation about an interest rate cut by the Bank of England next month.
The UK’s overall inflation rate is above the Bank of England’s 2% target, the core consumer price index excluding volatile items accelerated unexpectedly, and the service sector inflation rate closely tracked by Bank of England officials also increased at a faster rate of 5%. Headline inflation appears to be heading in the direction predicted by the Monetary Policy Committee (MPC) at the beginning of the month. The Monetary Policy Committee forecast inflation at 2.4% in November and 2.5% in December.
The inflation data underlined the need for gradual policy easing recommended by Bank of England Governor Andrew Bailey in comments at a press conference following the November 7 policy decision to cut interest rates by 25 basis points to 4.75%. suggestion.
On the contrary, according to Bloomberg, Bank of England deputy governor Dave Ramsden said after the release of inflation data on Wednesday that he expected the economy to “continue to normalize” and continue to show “low inflation and relatively stable inflation” “trend. Lumsden’s comments appeared to be dovish, as he said he would consider a less gradual approach to rate cuts if the evidence begins to “point more clearly to further downward pressure on inflation.”
Looking ahead, investors will pay close attention to October retail sales data and November S&P Global/CIPS Purchasing Managers Index (PMI) flash data due to be released on Friday.
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