The pound has fallen by around 1% against the euro and US dollar this morning following an announcement that UK consumer price inflation (CPI) has fallen to 7.9%, lower than expected.
While this is still far above the government target of 2%, and considerably worse than all other major economies, it offers the hope for mortgagees and businesses that interest rates will not be rising as high as feared. That has knocked the pound to its lowest position since late May against the euro.
Along with the headline inflation rate, there was also good news on other measures such as ‘core inflation’, which removes the more volatile prices such as energy and food. This also fell, although less steeply, to 6.9%. On a monthly basis, core price rises dropped from 0.8% last month to just 0.2% this time.
The pound has an annoying habit of falling just when British schools are about to break up for summer and people head off to the sun, but for property buyers who committed to a property purchase in the spring and are just about to complete, the implications could be more serious.
Sterling remains well above the average of 2023, for now, but for anyone about to make a commitment to buy it could well be worth locking in your rate. Just give your trader a call on 020 7898 0541.
Things could get worse. Another bit of data that the Bank of England policymakers will be interested in is UK retail sales, which comes out on Friday. If the ‘medicine’ of tightening monetary policy is working and the economy is slowing down, the Bank will be able to pause interest rate rises, as they have in the US. The effect on the dollar has been a sharp fall of between 2 and 5% against other major currencies, just in the past month.
That could be repeated for sterling.
