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Pound surges on CPI figures.
Published on 21.03.2017 19:21

The Pound has surged forward in today’s trading after stronger than expected inflation figures raised the prospects of an interest rate hike from the bank of England.

At 3.32pm (GMT) the British currency was trading at $1.2464 up from $1.2321 in yesterday’s trading.

Data out earlier today from the UK showed inflation jumped in February to 2.3 percent on a yearly basis marking the highest level since 2013, which was largely driven, by rising fuel and food prices.

Even more surprising, the figure is well above the BOE’s target rate of 2 percent, which was not expected until well into the second half of the year.

"This data puts more pressure on the Bank of England to consider a rate rise," said Neil Wilson at ETX Capital.

"The MPC said last week it would 'take relatively little further upside news on the prospects for activity or inflation' to warrant tightening. It has also said it has limited tolerance for inflation to overshoot, which it is now doing. “he added.

With article 50, the process for the UK to leave the European union due to be triggered next week, and the uncertainty that may surround this event, some say a rate cut in the nearest future is a bit premature.

“Their forecasts predict a slowdown in coming months so the last thing that they want to deal with is inflation being above target,” noted Aberdeen Asset Management fund manager James Athey

“It's unlikely that they'll do anything imminently but they really need to start considering getting rates back to where they were before the referendum. It was a pre-emptive cut that, whether warranted or not, has turbo-charged the depreciation in sterling and given the Bank this inflation headache.” He added.


Andrew Masters

Analyst

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