- James Tucker, ONS head of CPI
Britain's inflation climbed to the highest level in a year in January as an increase in alcohol and clothing prices pushed up the cost of living. The annual consumer price index rose to 0.3% in January, up from 0.2% in the prior month, according to the Office for National Statistics. Alcohol and tobacco were the main contributors to the increase as they jumped 1.3% compared with January 2015. The ONS reported that inflation also rose as fuel and food prices declined less than they did a year ago. Core inflation, which strips out volatile components such as energy and food, slowed to 1.2%. Inflation is predicted to edge up slowly this year, as the impact of global oil plunge drops out of the headline rate. However, the Bank of England expects the price growth to remain below its 2% target until 2018. The central bank predicts consumer prices to rise to 0.5% by the summer.
Financial markets are not anticipating an interest rate hike until the end of the decade due to mounting uncertainty over the global economy and the oil price rout. The central bank lowered its growth forecasts for the British economy and voted to keep interest rates on hold at 0.5% at the meeting earlier in the month. The BoE revised its forecasts for UK GDP for the next three years to 2.2% for the current year, 2.4% in 2017 and 2.5% in 2018.
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