Figures out today show consumer price inflation rose above the Bank of England’s target in July, going against forecasts that it would drop below 2 per cent.
Prices in July were 2.1 per cent higher than a year earlier, increasing from 2 per cent in June and May, the Office for National Statistics said.
Sam Fuller, Director of Financial Markets Online said, “Sterling found its mojo – only to misplace it within minutes.
“Ordinarily the return of above target inflation, and the news that UK workers’ wages are rising at their fastest rate for 11 years, would drag the possibility of an interest rate rise onto the table.
“But for now the Bank of England has bigger worries than inflationary pressure. And the markets quickly concluded that Britain’s ratesetters will continue to keep their inflationary mandate firmly in the drawer, and focus instead on the UK’s shrinking economy and the rising danger of recession.
“With sterling flailing, and likely to continue to do so as the UK hurtles towards a ‘no-deal’ Brexit in October, the two risks could even converge into the worst of all possible worlds – stagflation.
“That prospect, distant as it is, is so awful that the chances of an interest rate rise in the UK remain negligible. As a result the Pound is set to continue its limp progress – little moved by economic data and instead a hostage to political events.”