View the article online at http://citywire.co.uk/money/article/a882659
UK inflation jumps to one-year high
But at 0.3% inflation remains very low, say experts, and with no real upward pressure on the cost of living, interest rates will remain frozen.
Consumer price inflation (CPI) recorded its largest 12-month jump in more than a year in January, but don’t get excited: at 0.3% inflation is still very low and puts no pressure on the Bank of England to raise interest rates.
Petrol, and to a lesser extent food, alcoholic drinks and clothing, all contributed to the lift in inflation from 0.2% in December, a third consecutive monthly rise in the cost of living, according to the Office for National Statistics.
Although fuel prices fell 2.6% month on month, a year ago they slumped 6.8% and the smaller decline meant comparatively inflation was higher.
Ben Brettell, senior economist at Hargreaves Lansdown, said if the recent rally in oil prices to $34 a barrel continued there could be a further pick-up in inflation.
Nevertheless, the trend is for low inflation. ‘Core inflation, which strips out volatile components like food and energy, is a better measure of the underlying inflationary pressures in the economy. It fell by more than expected to 1.2% in January from 1.4% the previous month.’
Maike Currie, investment director at Fidelity International, said: ‘Don’t be fooled by the incremental rises we have witnessed in recent months – inflation is still a far cry from the Bank of England’s target rate of 2%.
‘Deflationary forces are likely to continue to sweep the globe and batter equity markets, as a slowdown in the emerging world and the global manufacturing sector puts a dampener on demand.’
Wage growth is a key influence on inflation and figures released tomorrow are expected to show a further slowdown in pay settlements.
This week Ian McCafferty, formerly the sole ‘hawk’ on the Bank of England’s monetary policy committee voting for higher interest rates, explained he had changed his mind because of the lack of inflationary pressure.
Earlier this month the Bank said it did not expect inflation to reach its 2% target until 2018
News sponsored by:
From Brazil and Mexico, to Vietnam and Nigeria, the rapidly developing economies of Latin American and frontier markets, which are some of the smaller, less developed economies in the world, provides investors with a wealth of potential opportunities. Discover why BlackRock's investment trust range is well placed to help you make more of these exciting regions.
In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
More about this:
Tools from Citywire Money
From the Forums
Weekly email from The Lolly
Get simple, easy ways to make more from your money. Just enter your email address below
An error occured while subscribing your email. Please try again later.
Thank you for registering for your weekly newsletter from The Lolly.
Keep an eye out for us in your inbox, and please add firstname.lastname@example.org to your safe senders list so we don't get junked.
by Michelle McGagh on Sep 27, 2016 at 12:00