Permanent signals came from inflation in England. Inflation in the country, led by the food and non-alcoholic beverages group, increased more than expected, exacerbating the cost of living crisis on households.
The annual consumer inflation, which hit double digits 40 years later in July, dropped to single digits in August and rose to double digits again in September.
Inflation in the country was recorded as 10.1 percent in September. Economists surveyed by Bloomberg had expected annual inflation of 10 percent.
In September, monthly inflation was 0.5 percent, above the 0.4 percent expectation.
Annual core inflation in the country was 6.5 percent in September. The expectation for this data was 6.4 percent.
A STEP BACK FROM THE TAX PLAN THAT DROPPED THE INFLATION OUTLOOK
While many factors, especially energy costs, created inflationary pressure recently, the tax cut plan that came to the agenda in the country was withdrawn after it created risks on the inflation outlook.
Britain's new Finance Minister Jeremy Hunt said this week that the plan was shelved.
However, the attention in the country is on the intervention of the Bank of England.
The Bank of England (BOE) will hold its first government bond sale on 1 November, just after 31 October when the new medium-term fiscal plan will be announced.
The Bank stated that it will realize its Asset Purchase Facility bond sales in the last quarter of 2022, at the size and speed previously announced, and that it will sell the remaining bonds due to the previous postponement in the following quarters. BOE stated that it will continue to monitor the markets closely while carrying out sales operations.
The Financial Times wrote that bond sales, also known as quantitative tightening, will be delayed by the BOE, and the bank denied this news yesterday.
Juntaro Morimoto, Currency Analyst at the Tokyo-based Sony Financial Group, stated that the new British Finance Minister Jeremy Hunt has cleared the confusion about the economic measures in the country, enabling the reversal of heavy selling and thus strengthening the sterling. “Contrary to the past, markets now consider inflation to be harmful to the economy,” Morimoto said. Therefore, if consumer prices are strong, stagflation concerns will increase and the sterling may lose value in an environment where monetary tightening suppresses growth.
On the other hand, Hunt, who wanted to reduce the UK's budget deficit, asked the ministries to cut their spending by 15%, according to sources close to the subject.