UK consumer prices declined 0.5% in January and, although the year-on-year rate increased to 1.8% from 1.6% which was the highest rate since June 2014, this was slightly lower than the consensus forecast of a sharper increase to 1.9%.
There was significant upward pressure on transport costs which was offset by a decline in clothing prices.
The data will dampen expectations that the Bank of England may need to tighten monetary policy more aggressively to curb inflation, although there was a larger than expected increase in producer prices which suggests underlying pressures may be building.
Sterling weakened significantly following the inflation data with the UK currency moving back below the 1.2500 level as the Euro moved to the 0.8520 area, although gilts reversed initial gains.
The UK currency was resilient at lower levels and regained support during the New York session as the Euro retreated back below 0.8500. The latest labour-market data will be released on Wednesday with a particular focus on the earnings data.
Related Insights
Morning Brief – UK
Humphrey Percy
Mon 5 Jun 2023
UK A couple of statistics over the weekend that caught the eye: the first is more marketing than substantive economically, but the second one is rather more significant. Taking the first one, Saffron Building Society is offering its savers who have been with them for more than 1 year the chance to open a monthly […]
Morning Brief – UK House Prices
Humphrey Percy
Fri 2 Jun 2023
UK House Prices Unsurprisingly given the 12 interest rate rises and cost of living squeeze in the UK, the housing market has seen its largest year on year fall since 2009 when everyone was suffering from the global financial crisis. In the year to April the UK housing market has dropped by 3.4% with the […]
Morning Brief – UK Wages
Humphrey Percy
Fri 26 May 2023
UK Wages Bank of England Governor Andrew Bailey yesterday warned of the pressure on wages that are threatening to lead to a wage price spiral as the effects of inflation on the cost of living together with the 12 consecutive interest rate rises that consumers have experienced. The market has not enjoyed the poor inflation […]
