- Makes imports cheaper (approx 40% of goods are imported), a stronger pound makes these cheaper for UK consumers.
- Reduced demand for UK exports should put downward pressure on prices.
Since 2008, wage growth has been more or less below CPI.
Recent evidence makes me think there is a stronger case for a higher headline inflation target, at least when you have a situation of high unemployment and rising commodity prices.
Another graph showing impact of rising energy prices on recent rise in CPI
Source: ONS - Time Series data