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August 23, 2019

Inflation in UK surpassed the target of 2% for the first time in three years


Inflation in UKThe inflation in UK surpassed the target of 2% for the first time in three years. In February, the consumer prices recorded growth of 2.3% yoy, according to the London-based National Institute of Statistics (ONS). This is the highest inflation rate since September 2013, while the experts had expected a slightly lower level – 2.1%. In January, the UK inflation level was 1.8%.

The core inflation, which does not take account of energy products and performs better underlying trend of prices in February is 2% and also surpassed expectations.

So inflation passed the 2% target set by the Bank of England. Recently institution repeatedly hinted its willingness to tolerate exceeding the target inflation is limited.

The weak pound after the vote for Brexit are the main reasons for rising prices, because it leads to more expensive imports.

The central banks can in principle opposed to growing inflationary pressures by raising interest rates. Following the publication of the data, the British pound rose to its highest level this month, growing by 0.8% to 1.2462 GBP/USD. This reflects the expectation that the pressure on the central bank to tighten monetary policy rises after strong inflation data.

Last week, the bank left its monetary policy unchanged. However, the decision for the first time in many years was not unanimous because the member of the central bank Kristin Forbes surprisingly voted to increase interest rates. The institution and keep the size of its program of buying assets at a level of 435 billion GBP.


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