UK Consumer price inflation was significantly lower in October than in September. However, the Pound was unable to benefit. Economists at Commerzbank analyze GBP outlook.
Inflation still well above the target
Even if the recent fall in inflation can be seen as positive, this cannot really help the Pound, because now interest rate cuts are likely to be increasingly discussed. This is despite the fact that uncertainty about the inflation outlook is still high and it remains to be seen how quickly price pressure will really ease. After all, at 5.7%, core inflation is still a long way from the BoE’s 2% target. Discussions about cutting interest rates simply don’t really fit into the picture.
This is likely to weigh on the Pound in the coming months, also in light of the fact that, according to our economists, the ECB is unlikely to make its first rate cut until the end of 2024.