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London - The pound fell for a second day versus the dollar as a report showed UK inflation unexpectedly slowed in October, bolstering speculation that interest rates will stay low for longer.
Sterling weakened against all of its 16 major peers. Annual consumer-price growth was 0.9% last month, compared with 1% in September, the Office for National Statistics said. The rate was forecast to increase to 1.1%, according to the median estimate in a Bloomberg survey of economists. Bank of England (BoE) Governor Mark Carney told lawmakers that sterling weakness was due to the outlook for slower UK growth.
“The data surprised on the downside and that added to my bearish sterling view,” said Neil Jones, head of hedge-fund sales at Mizuho Bank in London. “What Carney said appeared to be justifying a lower pound. If anything, there’s likely to be more downside to the currency than upside in the near term.”
The pound fell 0.6% to $1.2412 as of 14:39, after sliding 0.8% on Monday. The UK currency is down more than 16% since Britain voted in June to leave the European Union.
Sterling weakened for the first time in five days versus the euro, dropping 0.9% to 86.76 pence. The pound strengthened 3.2% last week, its best performance versus Europe’s shared currency since July 2015.
BOE officials earlier this month dropped plans to cut interest rates again and shifted to a neutral policy stance instead, saying their tolerance for faster price gains is limited. Inflation was as low as 0.3% in May. The neutral policy path is “appropriate” and officials aren’t considering expansion of any of the central bank’s programs, Carney said in testimony to lawmakers Tuesday.
The BOE’s nine-member Monetary Policy Committee cut interest rates in August and increased their asset-purchase target as part of a suite of stimulus measures to help boost the economy after the UK voted to quit the EU.
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