LONDON: Britain’s inflation slowed to a five-year low in September, official data showed yesterday, dimming prospects of a hike to British interest rates amid economic strains in the neighbouring eurozone.
The annual rate slid to 1.2 percent in September from 1.5 percent in August, the Office for National Statistics (ONS) said in a statement. Inflationary pressures eased sharply on the back of supermarket price wars and the falling cost of petrol and crude oil.
Analysts’ consensus forecast had been for the annual rate to dip to 1.4 percent, according to a survey by Dow Jones Newswires.
The rate of British inflation, or pace at which prices rise, has now held under the Bank of England’s government-set target of 2.0 percent for the last 11 months.
The central bank will also be mindful of recent grim economic data and the worsening outlook in the eurozone, which also faces the threat of deflation, or price falls.
“With inflation substantially below the Bank of England’s 2.0-percent target and the eurozone growth outlook appearing to deteriorate there is little pressure to tighten monetary policy anytime soon,” said ING bank economist James Knightley.
Both Britain and the eurozone are worried about low inflation, but this is a bigger problem in the euro area where economic growth is less buoyant and deflation is a real threat. In reaction, the British pound sank against the euro and dollar, as dealers reassessed the likely timing of a Bank of England rate hike. The European single currency rallied to a three-week high at 79.56 pence, compared with 79.26 pence late on Monday.
The British pound also slid to $1.5964, down from $1.6084. The Bank of England last week held its main interest rate at a record-low level of 0.50 percent. AFP
