GBP/INR started the trading session very confidently, but soon entered into the negative territory. Still, the pair is moving sideways, interrupting a rally that took off on Sunday. Currently, one British pound buys 92.648 Indian rupees, down 0.03% as of 7:10 AM UTC.

The sterling has lost earlier gains as the UK Office for National Statistics (ONS) reported in the morning that inflation growth slowed to the lowest since August 2016, driven by the deteriorating economic activity amid the COVID pandemic.

Britain’s consumer price index (CPI) fell to an annual rate of 0.8% last month from 1.5% in March, which is 0.1% below analysts’ expectations. In monthly terms, the indicator fell 0.2%.

Core CPI, which doesn’t comprise prices of energy, food, alcohol and tobacco, slightly slowed to an annual rate of 1.4%, down 0.1% from what was expected.

Retail price inflation, which is more volatile but still popular across bond markets, fell 1.5% from 2.6%.

BoE Says Inflation to Drop Below 1%

The Bank of England said that inflation might drop below 1% in the next few months. BoE Deputy Governor Ben Broadbent stressed that annual inflation might even go below zero by the end of the year. However, he does not anticipate a long period of deflation.

The ONS suggested earlier that inflation data might be distorted as the lockdown hasn’t allowed statisticians get prices on a larger scale.

Inflation was dragged down by falling prices transport, clothing and footwear, and the cost of household energy bills.

ONS Deputy National Statistician Jonathan Athow explained:

Falling petrol and diesel prices, combined with changes to the domestic energy price cap were the main reasons for lower inflation in April.

On the other side, the price of toys, video games and consoles has increased.

Speaking more broadly, Britain’s economy might experience the worst recession in about three centuries. Elsewhere, Goldman Sachs analysts said that the Indian economy would see the worst recession in its history.

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