Inflation in Britain unexpectedly fell in the year to last month, official figures showed yesterday in a development that’s likely to ease market expectations that the Bank of England will raise interest rates soon.
The UK Office for National Statistics said consumer prices were 2.6 percent higher in the year to last month, down from 2.9 percent the previous month.
The consensus was that inflation would rise to 3 percent, which would have been a full percentage point higher than the bank’s target rate.
The surprise fall, the first since October last year, was largely due to falling gas prices at the pump as lower wholesale crude prices were passed on to drivers.
Despite the fall, living standards in Britain are still falling as price increases outpace wage rises.
Inflation has risen sharply from 0.5 percent in June last year largely because the country’s vote to leave the EU triggered a 15 percent drop in the value of the pound.
Although a lower pound may help exporters sell their wares in international markets, all other things being equal, it makes imported goods such as food and energy more expensive.
The spike in inflation has caused concern among some rate-setters at the Bank of England.
Last month, three of the eight members of the bank’s Monetary Policy Committee voted to increase the benchmark interest rate by a quarter-point from the record low of 0.25 percent.
The rest though, while acknowledging the inflation spike, thought a rate hike could be counterproductive for the British economy, which grew by less than any other G7 country in the first quarter of the year.
The main uncertainty surrounding the British economy relates to Brexit and what trading relationship the country will have with the EU after it leaves the bloc in March 2019.
The British government has only just started full-scale Brexit discussions with the EU.
The pound fell after the inflation data as traders priced in a lower interest rate profile for the country.
Earlier it had hit a high for this year at above US$1.31 as traders bet that the inflation data would be higher than anticipated and potentially force the hand of the bank to raise interest rates soon.
Ben Brettell, senior economist at stockbrokers Hargreaves Lansdown, said easing inflation, if sustained, could help shore up the British economy in the months ahead as economists had expected real incomes to continue to fall with negative repercussions for retail sales.
“If this fails to materialize the economy could see a stronger second half to the year,” he said.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
PLANS: MSI is also planning to upgrade its service center in the Netherlands Micro-Star International Co (MSI, 微星) yesterday said it plans to set up a server assembly line at its Poland service center this year at the earliest. The computer and peripherals manufacturer expects that the new server assembly line would shorten transportation times in shipments to European countries, a company spokesperson told the Taipei Times by telephone. MSI manufactures motherboards, graphics cards, notebook computers, servers, optical storage devices and communication devices. The company operates plants in Taiwan and China, and runs a global network of service centers. The company is also considering upgrading its service center in the Netherlands into a
RSS