Yael Selfin, Chief Economist at KPMG in the UK, comments on today’s inflation figures:
“Data published by the ONS shows that the rate of inflation in January was unchanged from December at 3.0%. January is typified by steep discounts at retailers, and the overall fall in prices during that month was in line with what would be expected for this time of the year, with the overall rise for the year to January reflecting the preceding 11 months of nearly uninterrupted price rises.
“Recent increases in crude oil prices have put some upward pressure on inflation and may raise the price of fuel at forecourts over the next few months, this in turn could add a further 0.3 percentage points to the annual rate of inflation. However, the main cause for the 2017’s surge in inflation has been the effects of Sterling’s depreciation in mid-2016. This translated into increases in import prices as well as into the standard basket of consumer goods, and the expectation is that the push from these effects will fade over the coming months.
“Today’s inflation rate of 3.0% suggests that inflationary pressures may be easing after a peak of 3.1% in November 2017, with inflation likely to start moderating towards the Bank of England’s target of 2.0%. The hawkish tone of last week’s MPC meeting and inflation report imply that another rate rise may be on the cards as early as May. The test for policymakers may instead come from the threat of rising domestic inflation pressures. Continued tightness in the labour market could lead to greater demands for wage increases, which may force the MPC to become more active in acting against inflationary pressures.
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