According to the Office for National Statistics in the UK, the Consumer Price Index (CPI) y/y, which serves as an indicator of inflation, has fallen to 10.1% from its previous reading of 10.4%.
Figure 1: UK Inflation Rate, Tradingeconomics.com
Following the CPI release, the British pound increased in value. As a result, the GBP/USD pair witnessed a significant increase reaching a high of $1.24430 (Figure 2).
Figure 2: GBP/USD M30, TradingView.com
This movement was reflecting the reading that came higher than the expected 9.8 % level, which shows that inflation did ease slightly but it is still strong, and this could still encourage the Bank of England to continue with its hawkish rate hikes to battle inflation.
Figure 3: UK Interest Rate, Tradingeconomics.com
According to Figure 3, it illustrates a consistent upward trend in interest rates in the UK. However, how far can the Bank of England maintain this current pace of rate hikes?
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