Inflation

A senior European Central Bank(ECB) policymaker has issued a fresh warning that the impact of the US Federal Reserve reducing its massive stimulus programme might exceed that of 1994.

Sterling dropped and then recovered sharply minutes after new Bank of England Governor Mark Carney told the world he has no plans to raise rates any time soon, but was upbeat on UK growth.

Mark Carney has moved to defend the Bank of England's 'forward guidance' policies and said further stimulus may be necessary keep the UK economic recovery on course.

The UK's headline inflation rate fell back to 2.8% in July, matching analysts expectations, the latest data has revealed.

Today's inflation figures are a warning light on the UK economy's dashboard, according to stockbroker MB Capital trading director Marcus Bullus.

UK CPI inflation rose from 2.7% to 2.9% in June, with the largest upward contributions coming from petrol, clothing and footwear.

INFLATION

A dramatic shift in the outlook for interest rates has been seen with money market indicators now pricing in a base rate rise to 0.75% in two years' time rather than three.

QUICK QUIZ

UK CPI inflation rose from 2.4% to 2.7% in May, according to the Office for National Statistics, a larger than expected rise driven by transport and clothing costs.