Pound falls on inflation figures

Sterling has dipped further following the lower-than-expected inflation reading.

The pound is now down by 0.6% for the day at about $1.2102 against the US dollar.

Lower inflation might suggest that the doves at the Bank of England could hold sway, and interest rates may not have to rise as far as expected by markets. That in turn makes the pound less attractive to foreign investors.

The Bank’s chief economist, Huw Pill, has already indicated that monetary policymakers are concerned about increasing rates too much – a move that would choke off inflation but could also slow already meagre economic growth.

Earlier this month he said: “It is important we do enough to attain our objective to return inflation to within the 2% target. But of course it is also important that we guard against the possibility of doing too much. We need to keep that zen-like balance in our objective.”