Will the Rise in UK Inflation Affect Interest Rate Projections? - City Index
29 Jun, 2011, 15:00 BST
LONDON, June 29, 2011 /PRNewswire/ --
UK inflation hit a new two-and-a-half year high of 4.5% in April, whilst core prices rose at a record pace, hitting their highest levels since records began in January 1997. Joshua Raymond, Chief Market Strategist of City Index (http://www.cityindex.co.uk/), analyses the increase and its likely impact on the UK economy:
"Most of the increase is weighted in big increases in alcohol and transport," states the spread betting expert. "Alcohol and tobacco prices rose on the month nearly 5% and annually reached 8.9%, giving the component its highest annual inflation in prices since records began."
And what of the effect on interest rate projections? Mr. Raymond continues: "Should inflation rally past the 5% mark over the summer, it could send alarm bells ringing within the MPC that a rate hike may be warranted to curb its excessive escalation before the current market consensus of a hike to come at end of the year."
"Having said that, the language used in Mervyn King's now customary letter to the Chancellor of the Exchequer, George Osbourne, appeared to quash that potential by stating, "The MPC judges that attempting to bring inflation to the target quickly risks generating undesirable volatility in output." So in truth, the inflation figure, whilst rising more than expected, may actually have changed very little."
Spread betting and CFD trading allow traders to go long or short on a range of UK and US interest rates including Euribor, Eurodollar and Short Sterling. City Index spreads for short sterling start from just 0.02 points.
Find out more about financial trading with City Index at:
Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, contracts for difference (CFDs) and, in the UK, financial spread betting.
We constantly look to improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for more information.
SOURCE City Index