UK: Inflation leads to fall in pound

UK: Inflation leads to fall in pound

Low fuel prices in April have caused a lower than expected inflation rate and as a result the value of the Pound has fallen.

Inflation unexpectedly fell to 2.4% from 2.8% in March and inflation as measured by the retail price index (RPI) fell to 2.9% in April from 3.3% the previous month.

Despite the falling petrol prices (2.1p per litre for petrol and 3.9% for diesel), food prices have continued to rise and the cold weather has not helped with production. Food prices have risen 40% since 2007 even though wages have remained stagnant.

The pound is down 0.7% against the dollar and 0.5% against the euro because currency traders expect that the lower inflation rate will mean that the Bank of England is able to keep interest rates lower for longer.

The moderate economic growth and low inflation is expected to allow the incoming Bank of England Governor Mark Carney greater flexibility over new measures he can introduce to boost growth.

via BBC Business News

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