Consumer prices in Britain rose by up to August on 0,5%, almost twice the pace ahead of forecast. Annual inflation remains at the level of 3,1%, as in July. It was expected that it will fall to 2,9%, ie below the upper target, the corresponding forecasts of the Bank of England. Lower inflation also to somehow justify the drop in yield of Treasury securities. It should be noted that inflation in retail prices (in the past is an important indicator for the Bank of England), shows an increase of 4,8% year to year. Now their historically low yield is a considerable potential, which can be implemented at almost any time. We remember how it can be for example a yield of government debt securities in Greece. They are now placed with spread of 920 points to the relevant securities in Germany (based on today's auction 26-week debt securities).
For the British currency such news means some difficulties for the BOE, if necessary, to further stimulate the supply of money in the country and lending, as will raise concerns in the development of inflation in the country. This applies especially to the expectations of consumers and investors. Tomorrow is an important event of the Bank of England report on consumer assessment of inflation, which will represent the head of BOE Mervyn King. Very often in the past two years, he evoked a strong sell-Sterling, welcoming the lower pound as production support.
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