Inflation steady in UK
Source: Agencies |
June 15, 2011, Wednesday
|
Print Edition
Print Edition
INFLATION in Britain held at a two-and-a-half-year high in May as rising food prices balanced a drop in travel costs, providing little comfort for the Bank of England which expects inflation to hit 5 percent later this year.
The Office for National Statistics said consumer prices rose 0.2 percent last month, keeping the annual inflation rate at 4.5 percent, as forecast.
There was little market reaction as investors stuck to their bets that a weak economic outlook would keep UK interest rates at a record low 0.5 percent until the end of the year, following a run of recent soft data with harsh government spending cuts only now beginning to bite.
Money markets are not fully pricing in a rise in UK rates until May 2012.
"We still think the bank will look through the short-term spike," said Hetal Mehta at Daiwa Capital Markets.
Britain's biggest retailers are now feeling the pinch.
Tesco missed forecasts with a second straight quarterly fall in sales in its main British market as shoppers cut back on discretionary spending.
Finance Director Laurie McIlwee declined to comment on whether Britain's government was cutting spending too quickly but said the biggest challenges facing shoppers were higher prices for fuel and utility bills.
Core inflation dropped to 3.3 percent from April's record high of 3.7 percent.
"The fact that core inflation fell will be reassuring to the bank, and further diminishes the prospects of a rate increase this year," Mehta said.
The Office for National Statistics said consumer prices rose 0.2 percent last month, keeping the annual inflation rate at 4.5 percent, as forecast.
There was little market reaction as investors stuck to their bets that a weak economic outlook would keep UK interest rates at a record low 0.5 percent until the end of the year, following a run of recent soft data with harsh government spending cuts only now beginning to bite.
Money markets are not fully pricing in a rise in UK rates until May 2012.
"We still think the bank will look through the short-term spike," said Hetal Mehta at Daiwa Capital Markets.
Britain's biggest retailers are now feeling the pinch.
Tesco missed forecasts with a second straight quarterly fall in sales in its main British market as shoppers cut back on discretionary spending.
Finance Director Laurie McIlwee declined to comment on whether Britain's government was cutting spending too quickly but said the biggest challenges facing shoppers were higher prices for fuel and utility bills.
Core inflation dropped to 3.3 percent from April's record high of 3.7 percent.
"The fact that core inflation fell will be reassuring to the bank, and further diminishes the prospects of a rate increase this year," Mehta said.
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