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UK Inflation Rate Unexpectedly Falls to 0.9% in October

November 16, 2016 11:16 am Published by

Economists had predicted a 1.1% rise in the UK’s inflation rate for October and had said Sterling’s fall would push the CPR higher. Surprisingly, rates actually fell in October by 0.9% from 1% in September.

When inflation in the United Kingdom is somewhat lower than elsewhere, UK exports become more competitive and there will be an surge in demand for Sterling to buy UK goods. Foreign goods will also be less competitive, therefore UK citizens will buy fewer imports.

Countries with lower inflation rates tend to see an increase in the value of their currency.

moneey

Ever since the result of the UK’s decision to leave the EU was announced, there has been an expectation that inflation rates will rise.  The Bank of England recently forecast that inflation would rise to around 2.7% over the next 12 months. On Tuesday, Mark Carnry (BOE governor) told the Treasury Committee “the thinking now is that inflation is going to above target. We see more inflation coming through in 2017-18, and then a tail in 2019”.

Inflation has been below the bank’s 2% target for nearly three years – last year it was zero – the lowest since records began in 1950!

The Office for National Statistics have said the cost of raw materials surged in October and the price of goods leaving factories rose by 2.1% – the largest increase since April 2012.

From March 2017 the UK will also be introducing the cost of owning a home to the measure of inflation. This is predicted to show that inflation is higher than what is currently shown.

GBP to eur currency exchange rate

The Pound Sterling continues to appreciate against the Euro. You can follow the currency pair using our online currency charts here. If you’d like to secure the rate for the next 12 months to protect your money against currency fluctuations, you can book a Forward!

Call us on +44(0) 203 603 8940 or email us on [email protected] for more information.

 

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This post was written by Kayleigh Driscoll

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