Sterling still drifting on weak inflation figures
The pound has slumped this afternoon on the back of weak inflation figures, taking the currency to a two-week low against both the dollar and the euro.
Sterling drifted by one per cent against both the major currencies after inflation came in at a weaker-than-forecast 0.6 per cent in official figures out this morning. Economists had been expecting the pace of price rises to pick up on the back of the weaker currency.
By mid-afternoon the pound stood at $1.3206 and €1.1754 — the lowest levels since the end of last month. The currency is still broadly in line with where it was before the Bank of England unveiled its post-referendum stimulus package at the beginning of August.
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Chris Saint, senior analyst at Hargreaves Lansdown said the weaker inflation figures will "strengthen the Bank's belief that it still has room for manoeuvre to stimulate growth, with a future cut possible despite a generally more positive tone from data recently."
Threadneedle Street's rate-setting monetary policy committee (MPC) meets on Thursday to take stock of how the post-referendum economy is looking, and assess the early impact of its interest rate cut and quantitative easing extension. Analysts do not expect the MPC to cut rates further, though the Bank has said if growth falls to around zero it will cut rates towards zero before the end of the year.