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The BOE’s dilemma

UK CPI has been released lower than expected at 1.5% Y on Y and sterling is softening on the back of the data.  Whilst it’s not a major move or reversal of sterling’s uptrend it reminds us all the the Bank of England faces a small problem in that its most recent hawkish rhetoric (well, at least less dovish) comes at a time of below target inflation.  It’s hard to justify raising rates when inflation remains stuck below target.  Tomorrow will however be a more significant risk event as we’ll see whether any MPC members have voted for a rate hike.

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