Inflation dip gives Bank of England more options
An unexpected dip in inflation has strengthened Mark Carney's hand over the timing of the Bank of England's first interest rate hike.
The Office for National Statistics reported yesterday that consumer price inflation fell last month below the Bank of England's 2 per cent target for the first time since November 2009. Annual CPI inflation came in at 1.9 per cent in January, down from 2 per cent the previous month.
City analysts, who had expected no change in the rate, said subdued inflation would reinforce the determination of the Bank of England's Monetary Policy Committee to keep rates at the record low of 0.5 per cent to support the economy.
"They can continue focusing on ensuring the recovery continues," said James Knightley of ING. Philip Shaw of Investec said "a period of below-target inflation would give the committee a little more flexibility over exactly when it begins to raise rates."
Simon Wells of HSBC said prices were not likely to rise again soon and suggested the Bank might even start to consider the risks of excessively low inflation. "A few more prints like this and the BoE might start to worry about a more material undershoot in the inflation target," he said.
Financial markets currently expect the first rate rise to come in the second quarter of 2015, around the time of the next general election.
Last week Mr Carney said that, even though unemployment has fallen close to the Bank's 7 per cent forward guidance threshold two years sooner than it expected in last summer, the slack still justifies ultra-low rates.
The ONS said the major contributions apparently came from prices for recreational goods, furniture and also alcohol and tobacco. Core inflation, which strips out volatile items such as food and energy, eased to 1.6 per cent, down from 1.7 per cent in December. Analysts expected this to rise.
CPI inflation shot above 5 per cent in 2008, driven by a spike in energy prices. It fell back rapidly during the downturn, bottoming out at 1.1 per cent in September 2009, but then spiked to a 5.2 per cent peak in September 2011.
Sales of the tablet are set to fall again, say analysts
Met Police confirm there was a 'minor disturbance' and that no-one was arrested
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
Parties threaten resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
- 1 Indian footballer Peter Biaksangzuala dies after injuring spine doing somersault celebration
- 2 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 3 Banksy arrest hoax: Internet duped by fake report claiming that the street artist's identity has been revealed
- 4 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 5 Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
Banksy arrest hoax: Internet duped by fake report claiming that the street artist's identity has been revealed
'Russian submarine spotted' by Swedish military off coast of Stockholm
Brian Harvey turns up at Downing Street and 'demands to speak to Prime Minister'
Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Sorry Judy Finnigan – Ched Evans is no less sickening than an alleyway rapist
Residents should throw a street party and mix with immigrant neighbours, councils told
Workers 'could be forced to pay £5 a week' to get benefits
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver allegedly kicks gay couple off for kissing
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...