- The British Pound was little changed versus other major currencies
- UK’s Core CPI at 1.4%, above expectations
- Headline CPI rises to 0.2% year-on-year, as expected
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The British Pound was little changed versus other major currencies (at the time this report was written) after the UK’s Consumer Price Index (CPI) figures released today, showed inflation rose above expectations in December. Headline CPI figure showed an annual rise of 0.2% percent, as was expected by economists, which was above the November reading of 0.1%. The month on month figure came slightly above expectations by printing 0.1%, above the prior and expected figure of 0.0%. Core CPI, which excludes volatile factors such as food, energy, alcohol, and tobacco, rose to 1.4% from the prior and expected figure of 1.2%. Looking into the report, the Office for National Statistics said that the movements in transport costs, particularly air fares, were the main contributors to the rise in the rate, with downward pressures from alcohol, tobacco, food and non-alcoholic beverages partially offsetting the rise.
CPI readings are a key measure for the BoE in deciding when to begin raising interest rates. In their latest rate decision, the BoE said that the recent decline in oil prices meant that the expected increase in inflation is set to be more gradual than forecasted in the Committee’s November Inflation Report projections, and that the risks to the 2% inflation projections in two years’ time are a little to the downside. Perhaps these comments put the latest reading in question, with the market focusing on data further down the line. As was mentioned earlier today by DailyFX Currency Strategist Ilya Spivak, leading survey showed downward price pressures may have waned, opening the door for an upside surprise.The Sterling has been trading higher coming into the report which might suggest the market anticipated the slight uptick, and the British Pound was little changed.