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No Rise for the Moment

21. September 2015

In the UK, the FTSE 100 Index fell 1.3% on Friday, as mining and energy stocks mirrored the Fed’s growth concerns, leaving it 0.2% down over the week. Average earnings in the three months to July rose at their fastest rate for six years. Consumer price inflation fell back to zero in August, from 0.1% the month before. This was in line with the consensus forecast and was helped by a fall in petrol prices. Core inflation, which leaves out volatile food and energy prices, also fell, from July’s 1.2% to 1%.

Economists say the Consumer Prices Index will hover close to zero for most of the rest of the year, and could even fall back into negative territory. “With productivity finally picking up and keeping unit wage costs subdued, inflation will still take a long time to return to its target,” said Vicky Redwood of Capital Economics. “Accordingly, the [Bank of England’s] Monetary Policy Committee can take its time with the first interest rate rise.” Citigroup economists pushed back their forecast for a UK rate rise from the first half of 2016 to the last three months of the year.

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