Bank of England mulls more QE

Today’s UK inflation data showed consumer inflation falling to 4.2% in December, in line with Bank of England forecasts, hurting the Pound as more quantitative easing now becomes a possibility. The fall in inflation was helped by lower fuel prices and heavy high street discounting. While getting inflation under control is important for the economy at a time when wages are hardly rising, it is unfortunately not good for the Pound, since it gives the Bank of England more scope to increase quantitative easing which may happen in February. QE simply dilutes the value of sterling, usually giving significantly lower exchange rates, not good if you are sending money abroad. Tomorrow we have unemployment figures out which will be another important barometer of UK economic health and again could affect sterling when the announcement comes out at 9.30am.