Big surprise in UK CPI this week needed to trigger BoE into further rate easing
|A slew of backwards looking data on GDP and employment came out somewhat better than expected and have done little to sway the Bank of England into aggressively easing rates. The UK economy grew by a solid 0.3% in the second quarter of the year, after economists were bracing for effective stagnation.
With demand still growing, even if only partly a byproduct of the recent pleasant weather, the MPC's focus should remain on reining in stubbornly high inflation, which remains almost double the 2% target level.
Swap markets currently see no change in the base rate for at least the next couple of MPC meetings, with a two-in-three chance of another cut in December. We think that there’s a good chance that we see no more rate reductions at all during the rest of the year, which should continue to support the pound.
Wednesday’s inflation report for July could be highly important in this regard, although it will probably take a big surprise here to bring further easing into view.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.