BoE Survey Predicts Future Inflation of 3.20%
THE TAKEAWAY: BoE survey predicts 3.0% inflation -> Survey result is much higher than BoE target -> Sterling trading steady
The Bank of England’s inflation expectation survey for the next twelve months set a new 2-year low, coming in at the 3.20% for August. The previous survey result, which was released in May, was reported at 3.70%.
The BoE’s inflation expectation survey is conducted every few months and is based on the answers of 2000 interviewed individuals. The survey results are much higher than July’s annual inflation rate, which was reported at 2.6%, according to the consumer price index. This implies that expectations among individuals are for the inflation to rise higher and not fall closer to the BoE’s 2.0% target.
A higher inflation would mean that the BoE is less likely to cut its interest rate or add to monetary stimulus, which are both negative for the Pound. The central bank left its rates and asset purchase target unchanged in yesterday’s meeting, but said they are still open to additional monetary stimulus in the future.
The British pound did not significantly react to the lower survey and continued to trade around 1.5970. Resistance could be provided by the key 1.6000 level.
GBPUSD 15-minute: September 7, 2012
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