Oil prices weigh on inflation in the UK once again, with year on year CPI hitting 0.3%, within expectations. Core CPI is actually up to 1.4%. The Retail Price Index (RPI) fell to 1.1%.
GBP/USD is ticking up to 1.5355. If the BOE is not worried about headline inflation and core inflation is higher, there is no new impediment for rate hikes.
The pound is also higher against the euro.
More data: PPI Input fell 3.7%, more than 2.5% expected. PPI Output is down 0.5%, more than 0.2% expected. Also the HPI is lsowing to 9.8% y/y from 10% beforehand.
Nevertheless, all these falls in prices are seen as positives for the economy, especially as wage growth and Core CPI seems very stable.
The UK was expected to report a headline inflation rate of only 0.3% y/y for the month of January, down from 0.5% last month. The RPI was predicted to slide to 1.2% while core CPI carried expectations for a stable 1.3%. Nevertheless, the Bank of England sees lower inflation as temporary.
GBP/USD traded around 1.5340 before the publication.
In the last Quarterly Inflation Report, BOE governor Mark Carney sounded hawkish: the next move in interest rates is up, and the drop in oil prices is actually positive for the economy, contrary to the view in the continent.
More: EUR/GBP could reach 0.73 – BNPP
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