- Daragh Maher, a currency strategist at HSBC
Britain's inflation slid to the lowest level in 12 years in November as falling fuel prices pushed down transport costs, while food prices declined. The UK consumer prices dropped to 1%, down from 1.3% and compared with economists' expectations for 1.2%, the Office for National Statistics said. Oil prices have declined about 45% this year, pushing down energy costs across the globe. If inflation drops below 1% the Bank of England Governor Mark Carney would have to write a letter of explanation to the Chancellor George Osborne. The Bank of England said last month it projects inflation to slide below 1% in the next few months, and since then oil prices have plummeted further.
The British Pound rebounded from the lowest level in three weeks versus the single currency on Tuesday after Bank of England Governor Mark Carney played down UK inflation data. Carney said that falling oil prices were positive for the British economy and that inflation data left the BoE's policy stance intact. Until the summer, market participants were betting that the BoE would be the first major central bank to lift interest rates from their historic near-zero levels, driving the Pound to a six-year peak versus the Greenback at almost $1.72 in July. The recent figures, however, fuelled speculation that BoE policy makers are at least a year away from raising interest rates.
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