Pound holds its own against Euro as United Kingdom inflation rate dips

Javier Howell
January 18, 2018

Wholesale price-based inflation (WPI) has cooled in December, 2017 to a three-month low of 3.58% thanks to the decline in prices of food items, according to data released on Monday by the Commerce and Industry Ministry.

Food and non-alcoholic drinks also recorded smaller monthly growth of 0.6 per cent, down from 0.8 per cent in December 2016.

These factors were partly countered by increases in the prices for tobacco and for fuel, both partly influenced by tax changes announced in the Autumn budget.

"It now seems likely we'll see the rate steadily fall back towards the 2% target over the next year or so", Ben Brettell, an economist at Hargreaves Lansdown said in an emailed statement on Tuesday.

In November, the BoE's Monetary Policy Committee raised its key interest rate for the first time in more than a decade from 0.25% to 0.5%.

Another report from ONS showed that output price inflation accelerated to 3.3 percent in December from 3.1 percent in November.

Richard Stone, chief executive at The Share Centre says, "Inflation has remained relatively static since April 2017 when it rose to 2.7%".

The ONS also said it was too early to say whether this was the start of a longer-term reduction in the rate of inflation.

At the same time the Central Bureau of Statistics reported that housing prices in Israel fell 0.3% in October-November and have risen 2.4% over the past 12 months.

"Today's inflation figure simply reflects the fact that businesses that sell imported goods are passing on higher import prices, brought about by the fall in sterling to their customers", he said.

It said the percentage change in the average composite CPI for the twelve month period ending in December 2017 over the average of the CPI for the previous twelve month period was 16.50 percent, showing 0.26 percent point lower from 16.76 percent recorded in November 2017.

3% remains among the highest inflation rates in recent years, put it appears that price growth may now have peaked. "By the same token, it is clear that most inflation estimates by independent analysts are guesstimates designed for other purposes, which are outside global best practice", the RBZ said. In the meantime, United Kingdom house price data is due.

But other currency-sensitive measures, such as food and core goods, suggested that the impact of a 20% devaluation in sterling over the year to November 2016 was beginning to retreat.

Jacob Deppe, head of trading at Infinox, said: "Continuing price rises are unhelpful for households struggling with below inflation wage rises but perhaps there is a chink of light at the end of the tunnel".

Other reports by Insurance News

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