GBP AUD Lower After the Latest UK Inflation Figures 

GBP AUD Lower After the Latest UK Inflation Figures 

The GBP AUD exchange rate slumped by another -0.30 per cent lower after the release of inflation figures for the UK. The latest print came in at 9.4 per cent, slightly higher than analysts expected. The pound sterling suffered against the Australian dollar as traders considered the headwinds to the UK economy. 

UK house prices were also higher. After the latest data, the GBP to AUD rate trades at 1.7340.  

UK inflation figures top analysts’ expectations again

UK inflation again rose to 9.4 per cent, marking a 40-year price high. 

The Office for National Statistics (ONS) said the latest figures were largely driven by the 42 per cent year-on-year increase in petrol prices. However, food was also a driver. It increased by 10 per cent. 

Additionally, gas and electricity rate increases were a factor. The annual inflation rate stood at a record 70.2 per cent with further pressure expected. 

Chief Economist at Capital Economics, Paul Dales, noted that there are indicators that an easing in globally driven price pressures will be replaced by domestically driven pressures.  

“We think high inflation will mean the Bank of England continues to raise interest rates from 1.25 per cent to 3.00 per cent even when the economy is in recession, although it’s finely balanced as to whether the next hike is a 25bps or 50bps move,” he added. 

UK house prices recorded another high at 12.8 per cent annually. However, one mortgage broker told MSN that the period of “ultra-cheap money” is finished. It will soon begin to trickle through into house price growth. An increase in borrowing costs and significant pressure on household finances witnessed with inflation hitting 9.4 per cent will impact demand in the coming months.  

Australia announces a review of the RBA inflation tools

After recent criticism over its forecasts and interest-rate moves, Australian Treasurer Jim Chalmers announced a review of the Reserve Bank that will focus on its inflation target, policy tools, governance and culture. 

The review will consist of a three-person panel encompassing Carolyn Wilkins, a former Bank of Canada deputy governor, Renee Fry-McKibbin, an economics professor at the Australian National University and former Treasury official Gordon de Brouwer. 

The country faces a complex and quickly shifting economic environment and various long-term economic challenges. Chalmers said the country’s monetary policy framework must be in the best position, ensuring it makes the “right calls” to protect the interests of Australians and their economy. 

The RBA faced criticism after saying that rates would not rise until “at least” 2024. That gave mortgage owners the green light to wait for that timeframe before adjusting current deals or taking on the new property. The bank then conducted a U-turn and hiked rates in successive meetings, with rates set to rise further. Chalmers called for a forward-looking review with the best combination of future arrangements, discouraging “pot-shots” at the governor or board.  

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