News on Artclegiants.com November saw a significant slowdown in UK inflation to 3.9%. Which led to a decline in the value of the pound. A spike in the stock market, and further anticipation of an interest rate decrease early in the following year.
The figure for Wednesday was far less than the 4.4% annual growth in consumer prices. That experts had projected in a Reuters poll, as inflation was restrained by spending on food, entertainment, and gas.
According to figures from the Office for National Statistics. The 3.9% inflation rate was also the lowest since September 2021. Which has stoked debate over when the Bank of England may lower interest rates from their 15-year high.
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Prime Minister Rishi Sunak, who has pledged to cut prices ahead of the anticipated election in 2019. It will be strengthened by the November figure. which represents the first time food
The “surprisingly sharp fall” in consumer price inflation, according to economist Samuel Tombs of Pantheon Macroeconomics. It increased the likelihood that the BoE would lower rates in the first half of 2024. “far earlier than it has been prepared to signal so far.
In contrast to forecasts last Friday of a 1.07 percentage point decrease. The markets now fully expect a 0.25 percentage point cut by May. And estimate that rates will fall by 1.34 percentage points throughout next year.
The pound dropped to $1.265 versus the dollar, losing 0.6% of its value. At lunchtime, the FTSE 100 had risen to its highest level since May and was up 0.6%. Government bonds had also had a rally.
The yield on price-sensitive two-year gilts, which is inversely correlated with interest rates. fell to 4.12 percent, the lowest level since late May. By 0.17 percentage points.
Inflation in consumer prices. Tombs continued, appeared to be declining “far more quickly” than the Monetary Policy Committee. Of the Bank of England had forecast last month.
According to the ONS, core inflation, which doesn’t include food and energy costs, was 5.1% in the year ending in November as opposed to 5.7% the month before. It was also far less than what economists had predicted.
This month, the BoE opted to maintain rates at 5.25 percent while cautioning that it was dealing with more recalcitrant inflation than that of the US and the euro zone.The UK’s headline CPI growth rate is still greater than that of the US and the EU.
Insisting that it won’t be hurried to cut rates, the central bank is waiting for concrete proof from the labour market that it has taken sufficient steps to bring inflation back to its aim of 2%.
The market’s expectations of significant rate cuts next year, according to Principal Asset Management’s chief global strategist Seema Shah, were “knee-jerk” because the lower-than-expected numbers just represented “one data point and the BoE needs a string of them.”
The number of fluctuations in rate expectations is rather astounding, she continued, adding that the BoE has been “unclear in its communications all year, very topsy turvy, and it’s created an unsettling environment for investors.”
