- Howard Archer, IHS Global Insight's
The Sterling remained in the negative territory on Tuesday, after the disappointing CPI figures. The cable refreshed this week's low, hitting 1.6663 immediately after the release of the data, however, later, bounced back above daily pivot at 1.6723.
The ONS said consumer prices advanced only 1.6% in March, decelerating from 1.7% a month earlier, hitting the lowest since October 2009 and posting the third consecutive monthly drop in inflation. Moreover, one of the key indicators of economic health moved further away from the target of 2%. The main downside pressure came from record-low petrol price, a drop in energy prices and a decline in the cost of furniture as well as household goods. The only contribution to growth was made by restaurants and hotels, where prices picked up 0.5%. The core measure, which excludes the most volatile prices, also slowed in line with forecasts to 1.6% from 1.7% a month earlier. The main gauge of inflation stayed below the official target for three months, helping to ease the pressure on Mark Carney, who pledged to keep interest rates at a record-low of 0.5%. Additionally, slowing inflation is easing the squeeze on the nation's consumers, while also helping the pace of growth in wages to outpace inflationary pressure. A strong rebound in wages and salaries will eliminate the remaining slack, as inflation is expected to remain below the 2%-mark for the foreseeable future.
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