Since the first ever quarterly Inflation Report was published by the Bank of England back in 1993, every three months, businesses, traders and politicians eagerly anticipate every single publication in the hope that it will bring good news. The latest report from the Bank is due in November, and with the busy Christmas and New Year period coming into view, the latest quarterly report is going to be significant for both traders and investors who use the likes of City Index to help with their trading.
In a nutshell, the Inflation Report is done on a quarterly basis, detailing how much the rate of inflation and associated indexes such as the Consumer Price Index (CPI), Producer Price Index (PPI) and Retail Price Index (RPI) change throughout three months prior to each publication being completed. Inflation is a key indicator of how well the wider economy is performing, giving traders an better idea of likely monetary policy from the Bank of England and the impact of economic headwinds that are facing consumer spending..
One of the main reasons why the Bank’s Inflation Report is so important is that it contains a general overview of the UK economy’s performance over the previous quarter, with updated data revealing how much, if anything, the rate of inflation has changed, projections on underlying growth and what can be done to get the UK economy back on track. Each report contains data relating to demand, output and supply, meaning that if you’re a trader, it makes for essential reading, particularly if you are trading UK shares, the pound sterling or the FTSE 100.
Unlike interest rates, which have remained static at 0.5% since March 2009, inflation rates tend to fluctuate more regularly, and over a three-month period, they’re likely to change more often. It can be difficult to know whether inflation will change as expected, but by paying close attention to it, traders can have a better idea of how certain markets such as currencies or the FTSE 100 index is likely to react and this can give them a better idea of how to trade the financial markets and potentially profit from price moves. Of course, prices can move against traders, which is why they need to keep an eye out for the quarterly inflation report as it will help them research potential trading opportunities.
Photo by Rev Stan: http://www.flickr.com/photos/revstan/3624826971/
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.