ANNUAL UK inflation was last month below the Bank of England’s two per cent target for the first time in two years, as electricity and gas prices fell, official figures show.
The drop in annual UK consumer prices index inflation, from 2.1 per cent in December to 1.8% in January, was slightly steeper than forecast. Economists had forecast annual CPI inflation of 1.9% for January.
The Office for National Statistics noted that gas and electricity prices had fallen by 8.5% and 4.9% respectively between December and January.
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It observed: “The downward movement partially reflected the response from energy providers to [regulator] Ofgem’s…energy price cap, which came into effect from January 1, 2019.”
Ben Brettell, senior economist at stockbroker Hargreaves Lansdown, said: “In truth [the inflation] numbers aren’t going to change the Bank of England’s thinking about the economy or interest rates.
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“Assuming some kind of smooth Brexit, it should be able to gently nudge rates up over the next couple of years. Of course, if we get a cliff-edge, no-deal Brexit, all bets are off – a drop in sterling would likely see a sharp rise in imported inflation, but I’d expect the Bank to look through this and cut rates to support the economy.”
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Jason Lennard, senior economist at the National Institute of Economic and Social Research think-tank, said: “Based on our analysis of 135,000 goods and services in the basket, we found that disinflationary pressure is widespread. The drop in the rate of inflation cannot be explained by one-off factors such as the January sales, as only 6.5% of goods and services were listed at sales prices last month compared to 7.2% last year.”
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