UK consumer price inflation jumped to 1.8 per cent in the year to January from a rise of 1.6 per cent in the year to December, as the slump in the pound since last June’s Brexit referendum continued to trickle through to the high street.
According to data from the Office for National Statistics January’s rise was the biggest since June 2014. But the jump narrowly missed analyst expectations for a 1.9 per cent increase, just below the Bank of England’s official 2 per cent target.
The pound fell slightly against the dollar after the data was released and was recently trading back $1.25.
The ONS said that the main contributors to the increase in the rate were rising prices for motor fuels and to a lesser extent food prices, which were unchanged between December 2016 and January 2017, having fallen a year ago. These upward pressures were partially offset by prices for clothing and footwear, which fell by more than they did a year ago, the ONS added.
“With Britain seemingly heading for a hard Brexit, it’s likely we will see the pound continue to wobble over the next two years, resulting in higher inflation in the short term. Indeed, price rises are expected to reach 2.8 per cent by the end of the year,” said Tom Stevenson, an investment director at Fidelity International.
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