Pound Holds Firm as UK Inflation Rate Climbs to 2.9%

The British pound held its ground against the dollar on Wednesday after UK inflation data for July showed a slight increase, as expected.

The annual consumer price inflation rate rose to 2.9% in July from 2.6% in June, with economists polled by Reuters having predicted this outcome.

The Bank of England had forecast a smaller rise to 2.8%, while the BoE has an inflation target of 2%. Analysts expect at least one interest rate hike this year, but many economists polled by Reuters believe rates will remain unchanged at 3.75%.

Ruth Gregory, deputy chief UK economist at Capital Economics, said domestic inflation remains contained and that CPI inflation is expected to fall to 2.0% by the end of next year, provided energy prices don't rise significantly further.