IC Markets

UK Inflation Rises Above 3% for the First Time in Five Years

UK Inflation Rises Above 3% for the First Time in Five Years

Bank of EnglandFor the coming few days, traders can expect the Brexit news to lose a little bit of heat because the market is shifting its focus to the wage data in the United Kingdom. The UK wage data would be announced today, and a policy meeting has been scheduled by Bank of England tomorrow.

It is to be noted that US FOMC meeting would end today and the market is speculating the Fed to increase the benchmark rate within the range of 1.25 to 1.50 percent.

The Office for National Statistics yesterday submitted a report for a hike at consumer prices by 3.1% monthly basis in November from earlier 3%. Analysts were hoping the inflation rate to be 3 percent. It is the first time since 2012 that the inflation rate in the UK has crossed 3 percent. If we remove the volatile goods price, the core inflation rate is at 2.7% and meets the estimates of the analysts.

The main reason for the increased inflation rate in the United Kingdom is due to rise in airfares and entertainment service goods like for instance PC games.

Similarly, there is a rise of 1.8% in Producer Price Input in November as compared to 1.6% expected by the analysts and more than 1% than last month.

Core Finance

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In November, for the first time in 10 years, interest rates were increased by Bank of England to 0.5% to keep the inflation rate from rising. The Central Bank of England would continue raising the interest rates as long as the economy is showing signs of improvement and inflation is more than targeted 2 percent. The increased interest rate would make Pound stronger, and it would undoubtedly attract a lot of investors.

Since the UK inflation rate has crossed 3% mark, the Governor of Bank of England would write a public letter to the Chancellor and discuss the steps that Monetary Policy Committee would bring the inflation rate to 2 percent mark.

The market would be closely watching the wage data because it would give clear hints for the future rate hikes. A majority of economists believe that inflation would drop steadily in 2018 and earnings would rise above the inflation. The real wage growth would allow the Bank of England to increase the interest rates further.

Ed Lamadrid

Ed Lamadrid

I'm Ed Lamadrid, a CPA, blogger and a forex trader. Welcome to Top10FX.net. Follow my website for the most trustworthy forex broker reviews and last minute financial trading news.

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