Inflation Drops to 1.8%

The Office for National Statistics confirmed that the Consumer Prices Index (CPI) was 1.8% in January, down from 2.1% in December.

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 1.8% in January 2019, down from 2.0% in December 2018.

• The largest downward contribution to the change in the 12-month rate came from electricity, gas and other fuels, with prices overall falling between December 2018 and January 2019 compared with price rises the same time a year ago.

• These downward effects were partially offset by air fares, with prices falling between December 2018 and January 2019 by less than a year ago.

• The Consumer Prices Index (CPI) 12-month rate was 1.8% in January 2019, down from 2.1% in December 2018.

Yael Selfin, Chief Economist at KPMG UK, comments on today’s inflation figures:

“January saw the largest drop in Consumer Price Inflation since 2016, as lower energy prices and sharper discounts on clothing and footwear saw inflation fall well below the Bank of England’s target to 1.8%.

“The latest inflation figures give the Bank of England ample room to wait before it raises interest rates again. In the current climate of heightened uncertainty in regards to the Brexit process, businesses will benefit from a supportive monetary policy.

“Waning UK business investment, and potential short-term financing difficulties for many SMEs in the event of a no-deal Brexit, will require the Bank of England to keep rates low this year, and the latest inflation figures provide the MPC with a mandate to do that."

Source : Insight DIY Team and KPMG

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