This morning the UK’s annual inflation rate came in at 10.7%, a drop from 11.1% recorded in the year to October. It is slightly below the level predicted and this could have an influence on the Bank of England’s interest rate decision on Thursday.
The main reason for the decline in inflation comes from lower motor fuel costs. However, the core inflation rate, without the more volatile energy and food, also declined to 6.3% year-on-year, well below expectations.
The picture is not consistent across Europe, with Spanish core inflation of 6.3% slightly above last month, also released this morning.
Yesterday prime minister Rishi Sunak spoke out on the chaos caused by the rail strikes. He reiterated that the government is not in a position to shift on pay. However, as the unions will point out, with yesterday’s average earnings data showing rises of 6.1% but inflation of 10.7%, living standards are continuing to fall.
In the US, the inflation rate was revealed to have dropped to 7.1% in November, leading to a sell-off of dollars and a marked weakening of the currency. This is the seventh consecutive month of inflation rate declines and will probably allow the Federal Reserve to limit its interest rate rises to 50 basis points (to 4.5%), compared to the 75bp rises we have been seeing. We will hear the new interest rate this evening at 7pm UK time.
There’s a handful of data releases in the US today, covering everything from mortgage rates to crude oil stocks. It’ll be interesting to see how this information impacts the US dollar’s current rate.
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