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UK CommentJanuary inflation: in line with BoE and small impact

  1. Temporary effects from energy prices
  2. In line with the BoE prediction
  3. CPI overshadowed by Brexit
Temporary effects from energy prices
The largest downward contribution to the change in the 12-month rate came from electricity, gas and other fuels, with prices overall falling between December 2018 and January 2019 compared with price rises the same time a year ago. This was partly offset by airfares. There were small signs of rising labour costs feeding through to service inflation, remaining at 2.5%. We do not see inflation falling further over the nearest year. The drag on inflation from the Ofgem price cap will be reversed in April when the cap rises and food price inflation is also set to rise. So inflation will probably be back above the target within a matter of months, we believe.
In line with the BoE prediction
As the outcome was in line with BoE's projections it will have limited impact on the bank's decision making.
CPI overshadowed by Brexit
With the focus still on the Brexit process, there were only small moves in spot STG and short rates. To the BoE, the short-term focus also rests with the ticking down of the Brexit clock.

Source: Macrobond


Lars Henriksson


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