- UK annual inflation increased to 0.3 per cent in January (from 0.2 per cent year on year in December).
- Core inflation declined to 1.2 per cent in January (from 1.4 per cent year on year in December).
Commenting on the latest figures, Danske Bank Chief Economist Angela McGowan said:
“Both headline inflation and core inflation are expected to remain subdued in 2016 due to a combination of the past appreciation of sterling and continued low commodity prices. The latest small increase in headline inflation in January was mainly due to energy and food, alcoholic beverages & tobacco, which pushed up CPI inflation by 0.14 percentage points and 0.08 percentage points respectively. The main negative contributor was air fares, which declined 35.8 per cent month on month in January after the large increase of 46.0 per cent over the month to December. This component alone pushed down overall inflation by 0.20 percentage points (and core inflation by 0.27 percentage points).
“The Bank of England has made it clear that it is definitely not ‘Fed light’ and that it is in no hurry to hike rates. Danske Bank now believes that the Bank of England will not be prepared to raise interest rates until at least Quarter 1, 2017. There are many reasons for the Monetary Policy Committee to stay on hold for a long time. Inflation and wage growth are both subdued, inflation expectations have fallen, other central banks (most importantly the European Central Bank) have an easing bias and uncertainties around a potential Brexit loom.”
