What are the reasons why UK inflation is important to traders?
The Bank of England (BOE) is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. When the BOE reduces the purchase of bonds by the BOE as a result of an increase in inflation, the supply of pounds is likely to be squeezed, thus further increasing interest rates. In contrast, a slowdown in price rises might signal that monetary policy is loosening. When the GBP has an unexpectedly good result, it tends to be bullish for the currency.
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