UK Prices Rise by 11.1% in October, Next BoE Moves?

November 16, 2022 10:50

Inflation in the UK soared to 11.1 percent in October compared to 10.1 percent in September, marking a 41-year high on the back of energy prices. What does this mean for the Bank of England (BoE)?

In its November meeting, the BoE voted by a majority of 7-2 to increase interest rate guidance to 3 percent, a hike of 0.75 percent. Only two members of the committee voted for a rate hike under 0.75 percent and the latest inflation figures could add more weight to the argument for bigger increases at the next meeting on December 15.

The target rate of 2 percent inflation is far off at the time of writing, and it could take several more months of persistent rate increases to see a drop in prices. While growth has slowed in recent months, the employment market is still a strong point, ironically this could be feeding into overall inflation since consumers’ demand can meet the increases in suppliers’ prices.

Since the UK’s break from the European Union, customs duties on imports from the bloc restrict consumer access to lower-priced goods and services, adding to inflationary pressures.

If there is another big jump in the BoE’s interest rate policy in December, it could support the GBP’s value against a strong US Dollar as the UK’s key interest rate would approach the Federal Reserve’s current rate of 4 percent.

CAD

In other inflation news, Canada will release its year-on-year inflation rate for October today. Previously at the level of 6.9 percent, the market consensus sees the figure unchanged at 6.9 percent. If there is anything unexpected in the results, it could influence the CAD currency pairs and possibly, the Bank of Canada’s (BoC) next interest rate decision. The BoC raised short-term overnight interest rates to 3.75 percent in October and its next meeting is on December 7. Canada’s central bank forecasts that global growth will slow to 1.5 percent in 2023, and this could also be a factor in its December decision.

AUD

Australia will announce the latest Unemployment Rate figures for October on Thursday. Previously at the level of 3.5 percent, the market consensus expects the result to be at the level of 3.6 percent. Anything above or below the consensus might move the AUD currency pairs.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.