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Pensions

Rate rise uncertainty after inflation stalls

Rate rise uncertainty after inflation stalls

Mark Dunne
Thursday 19th July 2018

An interest rate rise this summer is looking less likely after inflation surprisingly remained steady at 2.4% in June.

The Consumer Price Index (CPI), a measure of inflation, did not rise to the 2.6% that analysts had expected, despite higher petrol and power costs. It was lower clothing, computer game and food prices that kept inflation steady.

A return to a normal interest rate environment now looks a long way off meaning that savers with a low appetite for risk will have to continue looking beyond bank accounts if they want to generate a return on their cash.

However, some investors could benefit from the Bank of England voting against lifting the base rate above 0.5% in August.

It could mean companies continue to face lower borrowing costs. Then there is the currency boost.

The pound slumped to a 10-month low against the dollar to $1.30 following the Office for National Statistics’ announcement.

This was a less than a 1% fall, but it could still provide some gains to UK investors with dollar exposure in their portfolio.

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