Table of Contents:
A worrying increase in inflation
In November, inflation in the United Kingdom peaked in the last eight months, exceeding the 2% target set by the Bank of England. The consumer price index (CPI) registered an annual increase of 2.6%, compared to 2.3% in October. This increase was mainly influenced by the rise in fuel and clothing prices, elements that helped to raise interest rate expectations
.
Market reactions and economic forecasts
Despite economists’ forecasts, who expected a stable CPI at 2.6%, the Bank of England had forecast a smaller increase, setting its expectations at 2.4%. After the publication of the report, the pound kept its value almost unchanged, standing at around $1.27. However, some analysts had predicted a more significant jump in inflation, especially following the acceleration of wage growth, which showed signs of recovery for the first time in more than
a year.
The challenges of stagflation
The current environment raises concerns about possible stagflation, a situation characterized by high inflation and low economic growth. This scenario represents a significant challenge for Prime Minister Keir Starmer, whose Labor government has promised to improve living standards. The Bank of England expects to keep interest rates unchanged at 4.75% during its next meeting, with forecasts of a possible reduction in rates only over the next year, while the United Kingdom faces both internal and external inflationary risks
.
Traders’ expectations and future strategies
Recent trends have led traders to revise their expectations, abandoning the idea of three rate cuts in the coming year and reducing forecasts to just two full cuts. This review reflects growing caution about the British economy and its future prospects. In an environment of global uncertainty, the Bank of England’s decisions will be crucial to stabilize the economy and address inflationary challenges
.
