18 April | Other

Stronger pound and lower energy prices to curb inflation in the UK — Bloomberg

Stronger pound and lower energy prices to curb inflation in the UK — Bloomberg

Bloomberg reports that price growth in the UK is to be held back by lower energy costs and the dollar falling in response to the US president's trade policies.

Bloomberg Economics’ model shows that these factors could curb inflation by 0.4%. Economists surveyed by the news agency project that its rate will hit 3.3% in the third quarter before subsiding. Yet, in February, the Bank of England expected inflation to rise to 3.7%. 

The central bank’s policymakers point out that the exchange rate is one factor able to affect the inflation rate. The pound has gained about 2% against a basket of currencies since the dollar weakened following Trump's tariff announcements. The change is likely to push down the cost of imports, Bloomberg says.  

At the same time, concerns about slowing UK GDP growth driven by US trade policy may prompt the Bank of England to accelerate monetary easing. Tomasz Wieladek of T. Rowe Price believes the regulator will have to push rates below the neutral level and into stimulative territory.

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