Good morning readers,
Today inflation is going to be the main focus for the Pound as we see a release at 09:30am which may give further information as to how much time the BOE have to play with before an interest rate hike becomes a necessity.
It appears inflation is still slowly creeping up and although some believe it may naturally drop away over the course of 2011 it is more than likely we will need a rate hike in the coming months to start pushing it back in the right direction.
People in the U.K have become used to lower interest rates and some are still spending freely keeping inflation high and potentially setting themselves up for a fall further down the line, therefore by raising interest rates it should slow spending and also lower inflation slightly.
Obviously this may cause problems for many if this is done too early however an interest rate hike is generally seen as positive for the currency concerned as it makes it much more attractive for investors to invest money into that particular economy, so anyone waiting for Sterling rates to go up may want to keep a very close eye on comments surrounding rate hikes in the near term.
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