The Great Britain pound jumped today as the inflation in Britain accelerated more than was anticipated, renewing talks about possible increase of the interest rates by the Bank of England.
The consumer prices index grew 4.5 percent in April, following the 4.0 percent increase in March. Economists predicted an increase by 4.2 percent. The sterling retreated after surging on the report, but currently regained some of its strength.
Does the growing inflation mean that the BoE will increase the lending rates soon? Not necessary. Bank’s Governor Mervyn King in his letter to Chancellor of the Exchequer George Osborne explained the growth of inflation by higher sales taxes and increased energy and import prices. He wrote:
Although the impact on inflation of these factors is difficult to quantify with precision, it is likely that had they not occurred inflation would have been substantially lower and probably below the target.
He also added that without this factors inflation may go below the bank’s target. But higher rates is not out of question as the Governor admitted that “the range of views among Committee members over the outlook for inflation is wider than usual”, so an increase of the borrowing costs is still a possibility, but it’d likely happen later this year.
GBP/USD rose to 1.6245 from 1.6188 as of 19:57 GMT today, following the jump to 1.6302. GBP/JPY went to 132.17 up from 130.74 after it climbed to 133.16.
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