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What's going on?
Britains central bank, the Bank of England (BoE), didnt make any changes when it met on Thursday but it said that it might give less support to the UK economy next year.
What does this mean?
The BoE is weary of inflation becoming too high. The cheap pound is currently causing inflation to increase because it makes it more expensive to import goods into Britain. If the BoE raised interest rates, the pound would likely go up in value, all else being equal, as more international investors moved money into Britain (i.e. chased the higher interest rates). That could counter inflation if it becomes too harmful to the economy (e.g. if people cant afford to buy as many things).
Why should I care?
The bigger picture: The pound is doing better than the euro but worse than the dollar.
The US dollar shot to a 14-year high versus other major currencies on Thursday, but that was primarily due to Wednesdays US Federal Reserve meeting. So while the pound has weakened versus the dollar, its not really because of anything happening in Britain. Compared to the euro, the pound has actually strengthened which is indicative of the BoE instituting its more neutral stance on interest rates while the European Central Bank continues to take more aggressive action.
For you personally: Its been a mixed week for the UK economy.
Data showed the jobs market in Britain remained relatively strong, but some cracks are beginning to appear: the number of people with jobs in Britain fell moderately in October. Meanwhile, prices rose at their fastest pace in two years in November. If these trends persist higher prices and fewer jobs economic growth is likely to decline next year.
Originally posted as part of the Finimize daily email.
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