March British pound traded sharply higher overnight after it was reported that inflation in January doubled Bank of England’s target. UK CPI jumped to 4.0% yoy in January, doubling Bank of England’s target of 2%. Bank of England’s Governor King noted the surge in inflation and reiterated that it’s temporary, due to tax hike and higher commodity costs. King also warned that “attempting to bring inflation back to the target quickly risks generating undesirable volatility in output and would increase the chances of undershooting the target in the medium term”. However, King also emphasized there is “a great deal of uncertainty about the medium-term outlook for inflation” and there are “real differences of view within the Committee.”
