THE TAKEAWAY: UK inflation drops -> new CPI levels predicted by economists -> Economic growth expected to suffer further -> Sterling strong against Dollar, Euro
Data from the UK released today showed December inflation falling to levels predicted by economists. Consumer Price Index was seen to have grown 0.4% on the month, and 4.2% when compared with last year. The numbers were the lowest CPI reading in six months. Meanwhile, Retail Price Index came in slightly above expectations.
The Bank of England expects inflation to slow significantly in 2012, as the UK struggles with fallout from the European credit crisis. Economic growth has all but stagnated, and the BoE has recently been engaged in extensive stimulus measures. Interest rates remain very low in an effort to encourage spending, and there is speculation that the central bank will in its next meeting expand its current asset purchase target which stands at 275 billion pounds.
Sterling was strong against the Dollar in a bout of risk appetite today and yesterday. The as-expected UK CPI data failed to move markets. Weakened by key credit downgrades over this past weekend, the Euro continued to suffer against the Pound.
