UK consumer price inflation was significantly lower in October than in September. However, the pound failed to benefit. Commerzbank economists analyze the outlook for the GBP.
Inflation still well above target
Although the recent drop in inflation can be considered positive, this cannot really help the Pound, because there is now likely to be more and more talk of interest rate cuts. This is despite the fact that uncertainty about the inflation outlook remains high and it remains to be seen how quickly price pressure will actually ease. After all, core inflation (5.7%) is still very far from the 2% target set by the Bank of England. The debate on reducing interest rates has no place in this context.
This is likely to weigh on the Pound in the coming months, also in light of the fact that, according to our economists, the ECB is unlikely to make its first rate cut until the end of 2024.
Source: Fx Street
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