Published: Wed, February 13, 2019
Markets | By Noel Gibbs

Retail inflation dips further to 2.05% in January, lowest in 19 months

The latest fall in inflation marks the end of the cost of living outstripping the Bank of England's 2% target for CPI, which is set by the government.

Analysts polled by Reuters had forecast January's annual increase in the consumer price index at 2.48 percent.

Inflation plunged to 1.8 per cent in January the lowest rate for two years, official statistics revealed today. Retail inflation based on the Consumer Price Index (CPI) for December 2018 has also been revised downward to 2.11 per cent from the earlier estimate of 2.19 per cent.

"The further falling back in inflation facilitates the Bank of England maintaining a "wait and see" approach on interest rates until after the United Kingdom leaves the EU", Howard Archer, chief economic adviser to the EY ITEM Club consultancy, said.

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"This reinforces expectations of a rate cut in April", he added.

Mining sector output contracted by 1 per cent in December as against 1.2 per cent growth in December 2017, the data showed.

Consumer non-durable goods growth was at 5.3 per cent in December compared with 16.8 per cent growth in the year-ago period.

RBI Governor Shaktikanta Das has downplayed the risk India could soon see higher inflation because of bigger budget spending, and has said the MPC would only look at the headline inflation number and ignore core inflation, which has stayed stubbornly high.

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"Morgan Stanley expects the U.S. core consumer price index (CPI) to rise 0.2 percent in January, in line with its three-month average, but sees the headline CPI falling for the fourth consecutive month to 1.5 percent from 1.9 percent". In rural areas, food prices fell 2.80% and in urban areas, it fell by 0.96%.

British consumers have been pressured by inflation caused by the slump in sterling against the dollar and euro after the Brexit referendum in June 2016.

A Reuters poll after the MPC's February 7 rate cut showed a slim majority of economists see another rate cut before the election. The central bank also changed its policy stance to "neutral" from "calibrated tightening", a shift that allows it to act either way on the key rates.

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