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prensaestatal.com Noviembre 18, 2017


Sterling Surges as UK Inflation Jumps Higher

14 Setiembre 2017, 11:41 | Dolorita Barahona

Sterling Surges as UK Inflation Jumps Higher

FTSE Slips as Pound Soars

Here's how City A.M.'s Shadow MPC voted. "The risks of a hike are not zero and may be growing", economists at Bank of America Merrill Lynch said on Tuesday. Inflation is now well above the bank's target of 2 percent, worsening the dilemma for rate-setters who are anxious about raising rates amid the economic uncertainty. Muddled messages from Mr Carney further dented bullishness.

Until such time as earnings growth picks up - and perhaps the Government's decision to loosen its 1% cap on public sector pay rises may speed that process up - the MPC is likely to hold off raising the cost of borrowing.

"The Bank of England faces a dilemma when it meets on Thursday between getting inflation in check and supporting the flagging post-Brexit economy", said Craig Erlam, senior market analyst at Oanda, in a note. Meanwhile, underlying inflationary pressures are building. Effectively, the Bank wanted to prepare the markets for a rate hike in the near-ish future.

Seven in favour of holding policy, two in favour of hiking.

"While no change is expected to monetary policy overall there could be little nuances that might point to a slight shift in tone with respect to the timing of a potential paring back of the current level of monetary easing", says Michael Hewson, chief market analyst at CMC Markets.

Output prices climbed 3.4 percent yearly, faster than the 3.2 percent increase in July.

Excluding energy and food items, the yearly core CPI index jumped by 0.3 percentage points to 2.7%, exceeding the expectations for a rise of 2.5%.

Growth has failed to show any meaningful signs of improvement. Household spending rose just 0.1% in Q2, down from the 0.4% registered in Q1 and well short of the 0.3% forecast.

The number of people in work rose by 181,000 in the three months to April compared with the three months to July, while there were 1.46mn unemployed people - 75,000 fewer than for February to April 2017.

A struggling economy and Brexit fears are offsetting any concerns over target inflation.

Sterling Surges as UK Inflation Jumps Higher
Sterling Surges as UK Inflation Jumps Higher

Using debit or credit cards when overseas means there is no choice over exchange rates until the day you use it.

Other periods of sterling strength since then include: November last year (FTSE -3 percent, MSCI +2 percent); mid-March through end-April this year (FTSE -3 percent, MSCI +1.5 percent); and the last three weeks (FTSE -1 percent, MSCI +2.5 percent).

The scale of the increase, which took the consumer price inflation rate to its joint-highest level in more than five years, was unexpected — the consensus in the markets was for a 2.8 percent rate.

The yearly figure showed that industrial production had increased to 3.2%, however this was slightly below what was expected. The outcome of the meeting is due to be announced at 1100 GMT on Thursday.

"Our own view is that rates won't rise this year or next".

The sterling is up on a surge today, close to a 6-week high against the dollar and is now holding at a one-year high this Wednesday. Inactivity also declined sharply.

The rate that prices are growing now stands at 2.6%, having fallen back a little from its post-Brexit peak of 2.9%. At present there are simply too many unknowns for the Bank to hike to rates.

"We still expect a 7-2 vote for unchanged rates".

"The only unknown remains around the vote of the chief economist Andrew Haldane".



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