By 2 Min Read* Pound increases 0.3 percent against the dollar, 0.1 percent against the euro* UK inflation rises faster than expected* Analysts foresee little impact on the pound. (Reuters) – LONDON, July 14 (Reuters) – On Wednesday, the pound surged against the dollar as UK inflation jumped faster than predicted to its highest level in almost three years, focusing attention on the Bank of England’s decision to keep its massive stimulus program in place. Inflation rose to 2.5 percent in June, exceeding the Bank of England’s 2 percent target for the first time since August 2018. As the economy recovered from its initial recession, higher costs for food, fuel, and old automobiles were among the factors. The pound rose as much as 0.3 percent to $1.38515 in reaction, regaining some of the ground lost on Tuesday, when it plunged 0.5 percent – its worst one-day drop in over a month – after the strongest US inflation in 13 years drove the greenback soaring. The pound was up 0.2 percent to $1.3843 at 07:26 GMT. Sterling rose 0.2 percent against the euro to 85.13 pence. The Bank of England has predicted that inflation will rise above 3% before dropping. Market analysts believe that a brief jump in inflation will not lead to fast policy tightening, with Wednesday’s higher number having little influence on the pound. In a note, ING analysts noted that “present high inflation should not necessarily hint to imminent BoE tightening because CPI pressures are expected to slow down in 2022.” “Today, this suggests there will be a small positive spillover into GBP.” (Tom Wilson contributed reporting, and Nick Macfie edited the piece.)/n
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