• U.k. inflation slows down again in April, BOE likely to hike interest rate in August

    Source: FxWire Pro - Commentary / 23 May 2018 09:32:11   America/New_York

    U.K.’s annual pace of inflation decelerated for the third straight month in April. The headline consumer price index dropped to 2.4 percent from 2.5 percent in the prior month, as compared with consensus expectations of 2.5 percent. The ongoing unwind of previous currency impacts continued to push down on inflation, along with some impact from the earlier timing of Easter this year, relative to 2017.

    These impacts were sufficient to counter some firming in inflation pressures elsewhere in the CPI basket, especially in communication, restaurant & hotels and recreation & culture prices. Therefore, ‘core’ CPI inflation also moved down, falling to 2.1 percent from 2.3 percent.

    However, in the months ahead, the feed through from the recent move up in oil prices, in addition to the effect of already announced rises in utility prices should give some upward influence to inflation, noted Lloyds Bank in a research report. Alongside growing evidence that the tightness of the labor market and subdued productivity are feeding through to higher unit labor costs, these factors should result in inflation proving more ‘sticky’ than it has done so far in 2018, tempering the pace at which it eases back towards the central bank’s 2 percent target. With the activity data likely to underpin expectations of a rebound in the second quarter GDP, the Bank of England is expected to sanction a 25 basis point hike during its meeting in August, added Lloyds Bank.

    At 13:00 GMT the FxWirePro's Hourly Strength Index of British Pound was slightly bearish at -62.7336, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 48.205. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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