Inflation in the UK is being kept in check by the continuing strength of the pound, bringing some relief to policy makers who are less pressured to raise interest rates as a result, according to Chief Investment Officer Haig Bathgate.
The figure for March, due later today, will probably show an annual rate of around 1.5%, much lower than the Bank of England's target of 2%, with falling or stable costs for things such as food and oil holding price gains back. The 10% advance in the past year for the pound against the dollar, the currency in which many of our imports are priced, is responsible for keeping the rate down. In turn, policy makers can hold interest rates – the determinant of mortgage and borrowing costs – lower for longer, helping fuel the recovery.
With that in mind, retail-sales data out this morning, which showed a 1.7% decline for March this year from the same month in 2013, shouldn't be misinterpreted. The reason for the slide is the late arrival of Easter this year – a holiday when spending is normally higher – rather than any underlying issue for the UK. There's no doubt however that the recovery in the US is powering ahead – similar data published yesterday showed retail sales climbed the most in March for 18 months, demonstrating that resilience of world's largest economy after the severe winter there.
Haig, speaking on BBC Radio's Good Morning Scotland, also commented in advance on results at JD Sports. .
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