- Jeremy Cook, chief economist at World First
Interest rate increase in the U.K. is put off from the agenda again, as Britain's consumer prices declined more than expected in July amid lower costs of clothing, footwear, food and non-alcoholic drinks. According to the Office for National Statistics, inflation fell to 1.6% from 1.9% a month earlier, whereas economists had predicted a CPI rate of 1.8%. Deeper discounts on the high street between June and July this year compared with the previous year slashed more than 0.2 percentage points of the headline CPI rate, the ONS said. CPI now appears to move towards May's figure of 1.5%, which at the time was the lowest level in more than four years. Inflation has been below the Bank of England 2% goal for seven consecutive months, marking the first time since 2005. It means the Bank of England remains under little pressure to lift interest rates in order to keep inflation at or below its target rate of 2%. Following the release of the inflation figures, the Pound weakened against both the U.S. Dollar, hitting its lowest level since April, and the shared currency.
Separately, data showed that producer price inflation in the U.K. declined for the second consecutive month in July. PPI input dropped by a seasonally adjusted 1.6% last month, against analysts' expectations for a 1.1% fall, while PPI input moved lower by 0.9% in June.
© Dukascopy Bank SA