The United Kingdom inflation accelerated more force than prognosis, throwing doubts about the probability of a rate reduced by the Bank of England in the short term. The general increased 1.2% in April, the strongest monthly jump since April 2022. The annual growth rate accelerated from 2.6% to 3.5%, the highest since January 2024. It accelerated at an annual rate of 3.8%, the highest in 13 months.
The most worrying thing about the current situation is the persistently positive trend in inflation. The general rate reached a minimum of 1.7% in September 2024, confirming the correction of the decision of the decision to initiate the monetary flexibility cycle shortly before. The additional flexibility of the policy will now require more justification of the Central Bank.
Housing, domestic services, leisure and culture are the drivers of inflation in Britain at this time. These are difficult categories for monetary policy. Unlike basic products and energy prices, we must not expect markets to cool sharply. In these circumstances, the Bank of England needs to follow a cooling economic growth policy.
This is good news for the pound, so nothing is surprising when updating its maximum three years. However, it is not easy for the pound by advancing up given the 11% increase in minimums at the beginning of the year. The latest news is a good sign to prepare for the bulls. However, for the Rally resume, it is better to wait for Hawkish signs from the Bank of England that is ready to pause, as now.
The FXPRO analysts team
