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According to a study conducted by Britain’s economic consultancy firm National Institute of Economic and Social Research (NIESR), the Kingdom’s Consumer Price Index (CPI) is understated by the Office for National Statistics (ONS), as cited by the Financial Times (FT). 

Key takeaways

“That the Office for National Statistics is understating the speed prices are rising.”

“The researchers say the rate of CPI is 0.4% than official figures.”

“The ONS is putting too much weight on goods and services that were unavailable because of Covid-19, dragging the inflation rate down.”

“Instead of changing the basket of goods to reflect what people were actually spending, the ONS had put in prices of goods and services that were missing so as not to change the overall rate of inflation.”

Market reaction

GBP/USD is off the monthly lows and looks to regain 1.2400 in anticipation ahead of the key EU-UK post-Brexit trade negotiations. The spot rises 0.27% to trade at 1.2366 while markets digest the latest comments from the UK PM Boris Johnson leaving the EU with an Australian style trade deal.