Inflation declined in the UK to 2.8% last month, below last month’s 3% and slightly lower than expectations. The result has weakened sterling in early trading, although the result was in line with Bank of England forecasts, if not the market’s assumption that higher costs for business, including the living wage, would pull through into prices.
There was an actual price drop (not just slower price rises) for women’s clothes, an extra boost to chancellor Rachel Reeves ahead of her Spring Statement today. There were falls in recreation and concert ticket prices too – welcome news to politicians who have to pay for such items themselves these days.
Unlike the Autumn Budget, her statement today looks likely to include some £15bn of spending cuts to meet her fiscal rules, which poses a further threat to sterling. According to data from Bank of America, large investors have been dumping the pound in the largest outflow of currency in two years. They warned of further losses.
The pound has so far this morning lost around 0.15% to the euro and a little more against the US dollar on the inflation news.
Yesterday the CBI’s gauge of retail sales for the UK showed its sharpest drop since last July, and we’ll get a clearer reading of that on Friday with the Office for National Statistics’ own data.
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