New figures from the Office for National Statistics have thrown cold water on the idea that the Bank...
New figures from the Office for National Statistics have thrown cold water on the idea that the Bank of England might actually lower interest rates further this autumn after the underlying retail prices index excluding mortgages (RPIX) gained 0.5% in July to hit 2%, closing in on the government's 2.5% target.
The new figures come as the US Federal Reserve bank today meets to discuss interest rates there in the context of recent figures showing slower than expected GDP growth.
A US interest rate cut looks more likely, but the ONS figures here may have eliminated any chance of the UK following suit in the near term given the already historically low rates.
Shares in the UK's leading FTSE index are down about 25 points at present at 4,195, mirroring a drop in US equities overnight.
Any US rate cut could reverse this trend, but UK investors may have to wait until tomorrow to get an idea of what is being discussed between members of the BoE's Monetary Policy Committee - which sets rates in the UK - when the minutes from the latest meeting two weeks ago are published.
A worst-case scenario would be indications of stagflation, the situation of rising unemployment and rising inflation.
Consumer spending has already cooled significantly in the UK, threatening to weaken the economy further unless the manufacturing sector performs a turnaround from the biggest drop in industrial output in 20 years recorded in June.
It may be that companies are starting to raise prices to keep income steady in the face of lower volumes shipped and lower than expected price elasticity of demand.
However, if inflation rises by the same amount during August, the MPC may have no choice but to raise rates - unless the government changes the mandated annual inflation target.
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