Pound Sterling Outlook : The deflation scare is upon us, perhaps a little ahead of schedule. The UK reported that Oct CPI fell 0.7% m/m to an annualized 4.5%--from 5.2% in September. The retail price index (includes mortgage costs) also fell from 5% annualized to 4.2%. A RBC Capital currency analyst quoted in the FT says inflation has turned the corner and is now so accerlated that the UK risks CPI under 1% by the second half of next year. “With the risk of outright deflation therefore on the rise, we continue to see further imminent aggressive rate reductions on the part of the BoE. Our base case remains that of four back-to-back 50 bp cuts with rates falling to 1.0% by the end of the first quarter of 2009.” And a bigger cut at the Dec 4 meeting is still a possibility, too.
Bye for Now
Barbara Rockefeller
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Pounds to Euros - Best Euro Rates contact IMS Foreign Exchange
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