UK Inflation Rose at a rate of 1.8% in January 2020
United Kingdom’s (UK) 12-month inflation rate was 1.8% in January 2020, increasing from 1.3% in December 2019, according to the Office of National Statistics. This increase marks a six-month high and was above market expectations for an increase of 1.6%. The key contributors to the increased inflation were the rise in prices at the pumps and smaller-than-usual drop in airfares prices this month when compared to the same period last year. Core inflation which excludes energy, fuel, alcohol and tobacco increased by 1.6% in January 2020 up from the 1.4% recorded in December 2019.
Notwithstanding January’s increase, UK’s inflation is still below the Bank of England’s (BOE) 2% target. The BOE anticipates that inflation is likely to run below its target through 2020 and 2021, however, this was based on the assumption that a trade agreement will be formalized between the United Kingdom and the European Union by the end of the calendar year. With the Monetary Policy Committee meeting set in March to decide what actions to be taken, we believe that they will not likely increase their policy rate at that time.