Forex News, Fundamental Analysis Forex
October 16, 2012 @ 10:51 am

Pound weakens as UK inflation rate falls, raising hopes of more QE


Consumer Price Inflation (CPI) printed a slower pace of inflation in the UK in September, according to a report issued by the Office for National Statistics. This was attributed to lower energy prices compared to last year.

Inflation rose at the slowest pace in almost three years, rising 2.2 percent last month, which was in line with forecasts and also lower than the August rate of 2.5 percent.

Inflation on food prices remained at the lowest in two years, and prices for other non-food related goods also fell at a much faster rate.

The slowing rate of inflation raises speculation that the Bank of England will now have more leeway to increase quantitative easing. Due to a series of soft UK data, particularly employment numbers and growth, the central bank will likely opt for more stimulus in order to boost the ailing British economy.

Some speculate that the BOE will increase its asset purchase programme by another 50 billion pounds at its next policy meeting on November 8. Such a move results in increasing the money supply, which in turn has a weakening effect on the British currency.

The pound began declining after the release of today’s data. GBPUSD touched a European session low of around $1.6070 versus an earlier high of around $1.6110.

However, some economists expect that CPI will rise again soon based on an announcement by some of the UK’s largest energy suppliers who said they will begin increasing prices by around 6 to 9 percent.

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6 Responses to “Pound weakens as UK inflation rate falls, raising hopes of more QE


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  4. Maksim Says:

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