Retail inflation drops to multi-year low in January

Inflation picks up to multi-year highs in China as central bank eyes tighter policy

India's annual rate of inflation based on wholesale prices rose to 5.25 per cent during last month from 3.39 per cent reported for December 2016, official data showed on Tuesday.

Despite increasing, inflation remains below the long-term trend - as the chart shows, inflation was more than 5% as recently as 2011 - however after two years of negligible price growth, 1.8% is still substantial, especially as prices are expected to keep rising due to the weaker pound following the European Union referendum.

The ONS said the rise in inflation, which measures the change in price for a wide basket of goods and services, was mainly down to pricier fuel, which went up 3.4% between December and January. Inflation would have been higher had prices for clothing and footwear not fallen compared to a year ago.

Inflation reached a two-and-a-half-year high in January as food and fuel prices pushed up the cost of living.

"But the honeymoon of rock-bottom price rises is now over with inflation having doubled since October, and set to increase further in the coming months".

In a statement, the ONS also added that, as of March 2017, the Consumer Prices Index including owner occupiers' housing costs (CPIH) will become the main inflation figure.


The inflation for the primary articles declined by 0.2 per cent as compared to a month earlier data. Potato prices recorded sharp fall at (-) 0.20 per cent, from 26.42 per cent in the previous month.

The Bank of England expects inflation to lift to its 2% target this month, peaking at 2.8% in the first half of next year, before falling back to 2.4% in three years' time.

'The pound weakened as investors took the view that the Bank of England's monetary policy committee will continue to take an unhurried approach to raising headline interest rates, ' said Russ Mould, investment director at fund supermarket AJ Bell.

Companies passed on some of their higher costs and output price inflation rose to 3.5%, the highest for five years. The index rose 1.6 percent over the past year, a relatively low level of inflation that suggests few costs are likely to be passed along to consumers.

However, WisdomTree director of research Viktor Nossek disagreed with the higher forecasts, and suggested the weaker United Kingdom economy would keep a lid on price rises.

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