UK inflation rises in April by less than Bank of England expected

The Office for National Statistics said house prices in March rose by an annual 1.4 percent across the United Kingdom. (AFP)
Updated 22 May 2019

UK inflation rises in April by less than Bank of England expected

  • Consumer prices rose at an annual rate of 2.1 percent in April after a 1.9 percent increase in March
  • Electricity and gas prices were the biggest driver of inflation last month

LONDON: British inflation rose last month by less than the Bank of England and investors had expected, but still hit its highest level this year, pushed up by a rise in energy bills.
Consumer prices rose at an annual rate of 2.1 percent in April after a 1.9 percent increase in March, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a rate of 2.2 percent, the same as the BoE’s forecast.
Sterling and government bonds were little changed by the data as core inflation, which excludes energy and food prices, held steady at 1.8 percent for the third month in a row.
“In principle, this is another reason to think the Bank of England will keep rates on hold for the foreseeable future,” ING economist James Smith said.
But he added that a strong labor market meant an interest rate hike in November could not be ruled out.
A recent weakening of inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit for many households whose spending drives Britain’s economy.
But Britain’s energy regulator raised a price cap on energy providers by 10 percent with effect from April, and all big six suppliers raised their standard prices by the same amount, which the BoE said would push inflation above target briefly.
Electricity and gas prices were the biggest driver of inflation last month, the ONS said.
Computer game and package holiday prices helped to offset the impact of the higher bills.
The ONS figures also suggested less short-term pressure in the pipeline for consumer prices than expected.
Manufacturers’ costs for raw materials — many of them imported — were 3.8 percent higher than in April 2018, much less than the 4.5 percent rise predicted by the Reuters poll.
The ONS said house prices in March rose by an annual 1.4 percent across the United Kingdom as a whole compared with 1.0 percent in February, marking the first increase in house price inflation since September.
Prices in London alone fell by 1.9 percent, a smaller drop than in February.
The ONS also revised down its estimate for Britain’s budget deficit in the last 2018/19 financial year that ended in March.
The headline measure of public sector net borrowing amounted to £23.5 billion ($29.8 billion) that year or 1.1 percent of gross domestic product, compared with the previous estimate of £24.7 billion or 1.2 percent of GDP.
In April, the first year of the 2019/20 financial year, the deficit stood at £5.8 billion, as expected by economists.


Finance shake-up with Saudi derivatives market to launch in Q3

Updated 40 sec ago

Finance shake-up with Saudi derivatives market to launch in Q3

  • Launch of futures contracts to be made before the end of the third quarter of this year

RIYADH: Saudi Arabia’s Capital Market Authority (CMA) plans to launch a derivatives exchange in the latest move to modernize the Kingdom’s financial landscape.

An announcement about the launch of futures contracts will be made before the end of the third quarter of this year, Asharq Al-Awsat newspaper reported, citing CMA Chairman Mohammed El-Kuwaiz.

“We are in the phase of developing the derivatives market with intensive work on the options contracts and the futures contracts” he said.

He was speaking in an online discussion panel organized by the General Authority for Small and Medium Enterprises (Monshaat).

The markets chief said that the impact of the coronavirus on the market would be more visible in second quarter earnings and that the regulator was working on easing some of its procedures in response.

Tadawul is planning to launch additional derivative products gradually as part of its strategy to diversify its product offering and provide more investment opportunities for global investors.

Separately, Tadawul CEO Khalid Al-Hussan disclosed that the bourse has received a number of requests for new share offerings that are currently being reviewed. He said three companies had been approved to list on the parallel market known as “Nomu.”

 

 

Decoder

Derivative

A derivative is a financial instrument that acts as contract between two or more parties whose value is based on an agreed-upon underlying asset such as a stock or a bond.