Economy

Editor's Take | CPI inflation eases to 2.05%

Editor's Take | CPI inflation eases to 2.05%

As well as the sharp decline in energy prices, Whitehall statisticians said the drop in inflation was also fuelled by lower petrol prices and a decline in the cost of hotel rooms. Economists had on an average expected inflation at 2.48 per cent in January, according to a poll of 30 economists surveyed by news agency Reuters before the last RBI policy meeting.

The top two year fix from Gatehouse Bank pays 2.35 per cent, now some 0.55 percentage points above inflation.

The main driver for inflation was the new energy price cap on standard variable tariffs recently introduced by energy watchdog Ofgem.

Meanwhile, heavy discounting from retailers saw clothing and footwear prices falling by 1.3% for the year to January, which had a small downward pull on inflation. The inflation rate for services like education and health also fell, bringing down the level of core inflation, after excluding volatile items like food and fuel.

Consumer price changes are important for the economy because inflation is a subtraction in the calculation of real GDP growth, so rising price pressures can depress economic growth and vice versa.

More news: Company that advertised one-way trips to Mars goes bankrupt

'That said, sadly it is still the case that many savings accounts are paying less than inflation - particularly older accounts and those held with the high street banks.

"We continue to think the Bank of England would press ahead with interest rate hikes if a Brexit deal is reached despite today's slip in inflation below target", Andrew Wishart, from Capital Economics said.

Brexit pandemonium in parliament and uncertainty over the shape of the UK's future relationship with the European Union is the only thing keeping the Bank of England from raising rates again, most economists say, given the United Kingdom is due to depart the EU on March 29.

Mumbai: India's headline and core inflation rates are set to converge in the coming months as the economy slows, increasing the chance of more interest rate cuts.

"Our suspicion is that inflation will spike significantly higher if the United Kingdom leaves the European Union without a deal". The fall in the value of the pound after the Brexit vote had pushed inflation higher, squeezing household disposable income as it pushed up the cost of imported goods.


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