June 26, 2017

British inflation rate rises to 4-year high of 2.9 pct

17 June 2017, 07:32 | Cesar Cruz

May inflation rate of 2.9% highest for nearly four years

May inflation rate of 2.9% highest for nearly four years

United States inflation data for the month of May showed consumer prices unexpectedly falling on a monthly basis, marking the second drop in three months.

"On a month-on-month basis, the headline index increased by 1.88% in May 2017, 0.28% points higher than the rate of 1.60% recorded in April 2017 indicating the existence of persistence pressure on prices despite the general decline in year on year inflation". The underlying increase was held at 0.1% with a 1.7% annual advance, also below consensus expectations. Sales excluding auto fuel dropped 1.6 percent, the most this year.

"Price movements recorded by All Items less farm produce or Core sub-index rose by 13.00& (year-on-year) in May, down by 1.80% points from rate recorded in April (14.80%)". They will increase unless June sees a fall of 3.3 per cent drop, a decline last seen in 2008.

In commodities, oil prices fell more than 1 percent, on the backfoot again on worries about USA oversupply.

The figures showed the challenge facing Prime Minister Theresa May and her new government, with signs that households are feeling the strain of rising prices since last year's vote to leave the European Union, weighing on the broader economy. U.S. consumers cutting down on their purchases of motor vehicles and other discretionary spending contributed to the decline.

The figure in March this year was also down 7,000 on the previous quarter.

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The dollar recorded sizable losses as the above data hit the markets. The index, which tracks the greenback against the currencies of major USA trade counterparts, was above the 97 level before the data release.

The dollar steadied against its Canadian counterpart after skidding to its lowest levels since late February in the wake of hawkish comments from Bank of Canada Governor Stephen Poloz, who signalled that the BOC could raise interest rates sooner than previously thought.

The euro rose to its highest since November 9 against the dollar, hitting $1.1295.

The dollar drifted in recent ranges in the calm before a forecast Federal Reserve storm, as investors awaited signals later in the global session on the Fed's policy outlook. The market was expecting it to stay flat.

British inflation remains stubbornly above the Bank of England's 2.0-percent target.

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