Pressure builds on sterling as inflation stalls

Sterling has come under pressure again after official figures showed inflation unexpectedly stalled in June.

The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) rate of inflation held steady at 2.4% as higher motor fuel, gas and electricity prices were offset by deeper discounting by clothing retailers. Economists had been anticipating inflation to rise to 2.6%.

The data raised doubts over a much-anticipated interest rate hike from the Bank of England, knocking sterling, which was down 0.55% against the dollar at 1.303. Against the euro, the pound fell 0.4% to 1.12.

Michael Hewson, chief market analyst at CMC Markets, said the Bank of England may well choose to push ahead with a rate rise next month anyway.

He said: “While some would argue that the weak inflation makes it less likely, inflation remains above target and doing nothing could see further sterling weakness, which in turn would put upward pressure on prices.

“As such it is still probable that the Bank of England will push rates higher next month, in the absence of any data or political shocks between now and then.”

London’s top-flight stocks pushed higher during the session. The FTSE 100 closed 0.65% or 49.95 points higher at 7,676.28.

European stocks followed the FTSE 100 upwards, with the Cac 40 in France rising 0.46% and the Dax in Germany up by 0.82%. Oil prices climbed again after suffering losses towards the start of the week. Brent crude was up 1.5% to 72.642 US dollars a barrel in the afternoon.