Sterling Holds Ground as UK Inflation Rises to 2.9%
The British pound has held its ground against the US dollar after UK inflation data was released on Wednesday. The numbers showed that consumer price inflation rose to 2.9% in July, as expected by economists polled by Reuters.
This increase is not a surprise, but it's still important for the UK economy and the sterling's value. According to Ruth Gregory, deputy chief UK economist at Capital Economics, 'Domestically generated inflation remains contained.' She believes that if energy prices don't rise further, CPI inflation will fall to 2.0% by the end of next year.
The Bank of England has a 2% inflation target, and traders expect at least one rate hike this year. However, most economists polled by Reuters think the central bank will leave rates unchanged at 3.75%. Goldman Sachs analysts disagree with this view, saying that the mismatch could lead to downside sterling pressure in the months ahead.