Pound Sterling Declines as UK Inflation Falls to 2.8%

The Pound Sterling weakened against major currencies following the release of UK inflation data for February, which showed a decrease to 2.8% year-over-year, lower than the expected 2.9%. This decline in inflation has prompted traders to increase bets on potential interest rate cuts by the Bank of England (BoE), with an 80% chance of a cut in May now being priced in. However, analysts caution that this dip may be temporary, with forecasts suggesting inflation could rise above 3% again by April and approach 3.5% by September due to factors such as increased energy costs. UK Finance Minister Rachel Reeves is expected to announce spending cuts in her Spring Statement, which may further affect Pound stability. Despite the current soft inflation figures, persistent service inflation and rising costs could limit the BoE's ability to ease monetary policy significantly. The overall outlook remains challenging for the Pound as investors monitor economic conditions closely.