U.K. Factory Gate Prices Rise At Fastest Pace in 22 Years

Daily Forex Fundamentals | Written by DailyFX | Jul 14 08 09:22 GMT |


U.K. Prices at the factory gate in June rose 10% from 9.3% the month prior, which was the fastest pace since 1986. Manufacturers are passing on the increased costs of oil and raw materials to consumers, which should keep inflation above the BoE's 3% threshold for the remainder of the year. Core prices rose 6.4% from 6.1%, showing that the effects of increasing energy costs are filtering through to other sectors. Rising prices are making it prohibitive for the central bank to lower interest rates in order to stave off a recession. The country is in the midst of the worst housing slump in at least a decade and by some measures the great depression. However, as Governor King has to write letters explaining the breach of the inflation threshold to Chancellor Darling he will be reluctant to continue the MPC's recent easing policy. The only good news for the committee was that the pace of input prices slowed to 2.1% from 3.9% the month prior, which may signal that prices may ease in the future.

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