Morning Forex Fundamental: GBP

Morning Forex Fundamental: GBP

'We suspect that the Inflation Report will leave the door open to more QE' - Howard Archer, an economist at IHS Global Insight

U.K. inflation to rebound in October

Impact Medium

The consumer prices in the U.K. are likely to rebound in October, due to the higher energy and food prices, pushing up the pace of inflation away from the closest level to the Bank of England's target in almost three years. Consumer price inflation last month is expected to rise to 2.4%, up from 2.2% in September, remaining above the BoE's 2% target. The deterioration of data is putting pressure on the government to provide some price relief, as the economic recovery is likely to run out of steam.

'Unfortunately, this seems as close as the MPC will get to hitting the target for quite some time,' said Philip Shaw, an economist at Investec Securities in London. 'Looking further ahead, our forecasts point to higher grain prices and a resumption of gas and electricity tariff increases dragging inflation further away from the target, and it could be as high as 3.5 percent by mid-2013.'

'We suspect that the Inflation Report will leave the door open to more QE,' said Howard Archer, an economist at IHS Global Insight in London.

The FTSE 100 Index turned lower 0.04 per cent to 5,767.27. The broader FTSE All-Share Index fell 0.08 per cent to 3,012.59