International Business: Pound falls as UK inflation hits 40 year high – Gulf Digital News

International Business: Pound falls as UK inflation hits 40 year high – Gulf Digital News

LONDON: The pound fell against the dollar on Wednesday after data showed British inflation rising to 9%, the highest level in 40 years.

At 0846 GMT, sterling was down 0.9% against the US dollar at $1.23820.

The drop reverses most of the gains made on Tuesday when the pound touched its highest level since May 5.

Strong labour market data had boosted expectations that the Bank of England would have to further increase interest rates, but the latest inflation numbers are fuelling fears that the threat of recession may temper how far the central bank can go.

"Yesterday it looked like with wage growth rising and unemployment so low it meant that the bank had more room for manoeuvre," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

"Now the eye wateringly high costs for consumers is going to lead to dropping consumer spending power which will have a deep impact on output in the UK economy."

Consumer price inflation hit 9% in April, making Britain's inflation rate the highest of Europe's five biggest economies and almost certainly the Group of Seven countries, with Canada and Japan yet to report figures for April. Neither are likely to match Britain's price growth.

“Of course the bank