Consumer price inflation in the UK remains at the same level as December and could signal an interest rate rise.
UK inflation remained at 3% in January, the same as December. Inflation hit a five-year high of 3.1% in November. However, after rising strongly since the middle of 2016, food price inflation now appears to be slowing and fell in January.
These figures are the first indication that dynamics in the labour market are finally driving some level of domestically generated inflation.
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The Bank of England identified evidence of higher wage pressure in its latest inflation report last week. It also signalled it intends to raise interest rates earlier and faster than previously thought in order to tame inflationary pressures resulting from the rising labour costs. It wants to get inflation closer to 2% within two years rather than three.
Investors have been expecting that rates would rise in May, with a second rise later this year. Given that interest rates are currently at 0.5%, rates could reach 1% by the end of this year.
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Consumer price inflation in the UK remains at the same level as December and could signal an interest rate rise.
UK inflation remained at 3% in January, the same as December. Inflation hit a five-year high of 3.1% in November. However, after rising strongly since the middle of 2016, food price inflation now appears to be slowing and fell in January.
These figures are the first indication that dynamics in the labour market are finally driving some level of domestically generated inflation.
The Bank of England identified evidence of higher wage pressure in its latest inflation report last week. It also signalled it intends to raise interest rates earlier and faster than previously thought in order to tame inflationary pressures resulting from the rising labour costs. It wants to get inflation closer to 2% within two years rather than three.
Investors have been expecting that rates would rise in May, with a second rise later this year. Given that interest rates are currently at 0.5%, rates could reach 1% by the end of this year.
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