HomeContributorsFundamental AnalysisUK Inflation Rises 1.8% In January But Below Forecasts

UK Inflation Rises 1.8% In January But Below Forecasts

‘While the further upturn in price pressures will fuel speculation that interest rates may start to rise later in 2017, the most likely scenario remains one of policy staying on hold over the next two years as the economy navigates through Brexit.’ – Chris Williamson, IHS Markit

British consumer prices increased last month due to higher oil costs and the weakening Pound, official data showed on Tuesday. According to the Office for National Statistics, the Consumer Price Index grew 1.8% year-over-year in January, the largest increase since June 2014, compared to the preceding month’s 1.6% rise. However, that was below the 1.9% market forecast as the steep fall in clothing prices offset inflationary pressures coming from food and fuel last month. On a yearly basis, the core CPI, which excludes volatile items such as oil and food, came in at 1.6%, unchanged from the prior month and behind analysts’ expectations of a 1.7% gain, while the Retail Price Index advanced 2.6% from 2.5% previously, missing projections of a sharper 2.8% rise. Furthermore, the ONS said factory gate prices grew at a faster than expected pace of 3.5% last month, the largest increase since December 2011. Input prices jumped 20.5% on a yearly basis, after rising 17% in the previous month, while output prices advanced 3.5%, surpassing the 3.2% rise market forecast. Analysts suggest that an upward pressure on inflation is likely to intensify in the upcoming months amid further depreciation of the British Pound. According to the Bank of England’s latest forecasts, the inflation rate is likely to rise above 2.7% this year.

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