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UK Inflation Remains Stable At 3%

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UK inflation remained stable in January as downward pressure from auto fuel and food prices was offset by upward effect from recreational and cultural goods.

Inflation came in at 3 percent in January, the same rate as seen in December, the Office for National Statistics reported Tuesday. Inflation was forecast to slow to 2.9 percent.

However, core inflation that excludes energy, food, alcoholic beverages and tobacco, accelerated to 2.7 percent from 2.5 percent in December, which was also above the expected 2.6 percent.

The Bank of England last week said the monetary policy would need to be tightened somewhat earlier and by a somewhat greater degree than anticipated.

The central bank forecast inflation to remain close to 3 percent in the first quarter. Nonetheless, it is expected to slow as the impact of sharp fall in the pound drops out of annual comparison.

Falling inflation will pave the way for a bit of a pick-up in growth this year, allowing the BoE to hike interest rates three times in 2018, more than markets expect, Paul Hollingsworth, an economist at Capital Economics, said.

Inflation, including owner occupiers' housing costs, held steady in January, at 2.7 percent.

On a monthly basis, overall consumer prices fell 0.5 percent compared to expectations of 0.6 percent drop.

In a separate communique, the ONS said output prices grew at the slowest pace in more than a year in January.

Output price inflation eased to 2.8 percent in January, the weakest since November 2016, from 3.3 percent a month ago. The rate was expected to fall moderately to 3 percent.

Likewise, input price inflation slowed to 4.7 percent from 5.4 percent in the previous month. This was the slowest rise since July 2016. Prices were forecast to gain 4.1 percent.

Month-on-month, output prices edged up 0.1 percent and input prices climbed 0.7 percent.

by RTTNews Staff Writer

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