GBP/USD: Sterling slips as UK inflation misses forecasts

The British pound dipped against the dollar and euro on Wednesday after data showed UK inflation did not accelerate as expected in January, potentially allowing the Bank of England to keep interest rates steady for longer.

Consumer price inflation held at an annual rate of 4.0% last month, unchanged from December and below economists’ forecasts of a 4.2% rate. The pound fell 0.2% against the dollar to $1.2565, compared to $1.2603 prior to the data release. Against the euro, sterling declined 0.18% to 85.21 pence.

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However, core inflation held at 5.1% while services inflation – closely watched by the BoE as an indicator of domestic price pressures – rose to 6.5% from 6.4% in December. This could still pressure the central bank to continue raising rates to contain inflation.