Helal Miah, investment research analyst at The Share Centre, explains what the latest inflation figures from the Office of National statistics mean for investors:

“The impact of the plunge in sterling is showing through to macro data as this morning the latest CPI figures for September showed that price levels rose to their highest level in two years.

"Furthermore, the year on year inflation rate topped 1% up from 0.6% the previous month and above expectations. The key explanation for such a big jump is the fading away of the oil price plunge and the rising costs of imported goods following sterling’s fall.

GBP Pound Coins

“This has had no real impact on sterling as it was trading up about 0.5% prior to the release and it has not changed the view around the next interest rate decision. A little while ago there was talk of another rate cut in November by the Bank of England, the chance of this diminished even before this data release. This rate of inflation is still way below the bank’s 2% target rate, and even if sterling’s fall takes inflation above the 2% level, the bank has already said it is willing to tolerate slightly higher inflation levels above the target in order to support economic growth and employment levels.

“We have seen positive impacts of sterling’s fall on the UK economy and UK plc such as Burberry’s results this morning but it is inevitable that the negative side will slowly come through in the data. However, it does not look like the disaster that many predicted prior to the referendum. Interest rates will undoubtedly stay lower for longer, there will be mixed takeaways for sterling’s fall for different UK listed companies, but overall the picture for UK equity investors look good. We therefore believe that the stock market still remains the most attractive asset class from an income and growth perspective.”

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