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* Based on revenue excluding FX (published financial statements, February 2022).
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LEARN ABOUT: Investing During Inflation

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The value of the British pound has risen sharply in recent days following an inflation shock, with UK bonds also falling in value. Experts say that this sudden spike in Sterling’s value reflects concerns over inflation and the potential impact it may have on the UK economy.

Inflation refers to the general rise in prices across an economy. When inflation rises above a certain level, it can lead to instability in financial markets and cause consumers to feel the squeeze on their wallets.

In the UK, inflation surged to 3.2% in August, its highest level in almost a decade. This was well above the Bank of England’s target rate of 2% and sparked concern among traders and investors.

As a result, the Sterling jumped by around 0.5% against the US dollar, reaching a six-week high. Similarly, UK bonds also took a hit as investors fretted about the impact of rising inflation on fixed-income investments.

Analysts expect inflation to remain high for the foreseeable future, as the global economy continues to recover from the pandemic. Supply chain disruptions, rising energy prices, and wage pressures are all contributing to the inflationary pressures currently seen in the UK and other countries.

However, experts say that the Bank of England is unlikely to raise interest rates in response to this latest inflation shock. While high inflation is concerning, the central bank is wary of prematurely tightening monetary policy and derailing the economic recovery.

Instead, the Bank of England is likely to continue monitoring the situation closely and wait for more data before taking any decisive action. This could potentially involve increasing interest rates or other measures to cool inflationary pressures if they persist over the long term.

Overall, Sterling’s recent jump and UK bond market sell-off highlight the ongoing concerns around rising inflation and the impact it may have on the wider economy. As inflation remains high in the coming months, investors and policymakers will need to remain vigilant and take decisive action if necessary to ensure a stable and sustainable recovery.