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UK Inflation at 11-Month High

UK Inflation at 11-Month HighUK Inflation at 11-Month High

Britain’s consumer price index inflation rose by an annualized 0.2% in December, in line with economists’ forecasts and the highest level since January 2015.

The figure represents a slight increase on the 0.1% reported for November, which was itself up on the readings of -0.1% recorded in both October and September last year, NewsNow reported.

Sterling briefly strengthened on publication of the figures, but then fell back to $1.43, near the fresh five-year low reached overnight.

The currency has weakened sharply against the dollar in recent months as commentators push back UK rate hike expectations.

A fresh slide in the price of oil to below $30 a barrel has led to renewed questioning of the belief that UK inflation–and therefore interest rates–will rise in 2016.

But the latest inflation figures have suggested some price pressures elsewhere. The core inflation measure, which strips out food and energy costs, rose by an annualized 1.4% on the month. Economists had expected the rate to remain at November’s reading of 1.2%.

  No Set Timetable

The governor of the Bank of England has warned that the UK faces “a powerful set of forces” preventing policymakers from raising interest rates and the date of the first rise is still uncertain.

Mark Carney said the plunge in oil prices had dragged down inflation and postponed the date of a rise from the current 0.25%, though he refused to indicate when the central bank would make its first move.

Carney said: “Monetary policy will continue to depend on economic prospects and not the calendar.”

But his gloomy outlook, which also highlighted the rapid slowdown in China and the recent turmoil in global markets, is likely to be seen as delaying the first increase in rates since 2008 until at least the end of this year or possibly 2017.

This will force many of the city’s investment banks to tear up their own forecasts, which have penciled a rise in the summer or autumn.

Carney said he wants to see faster growth and stronger inflation before raising interest rates, with no set timetable for an increase.

Financialtribune.com