Rate rise uncertainty after inflation stalls

19 Jul 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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