Cost of living edged up to 0.3% in January, its highest rate for a year
Inflation edged up to its highest rate for a year last month as rises in the price of alcohol and clothing pushed up the cost of living.
The consumer prices index (CPI) rose to 0.3% in January from 0.2% in December, according to the Office for National Statistics (ONS).
Alcohol and tobacco rose by 1.3% compared with January 2015, when there were heavy discounts on beer.
The ONS said inflation also rose as fuel and food prices dropped less than they did a year ago.
But despite the rise in CPI, the Bank of England predicts inflation will remain far below the government’s 2% target for some time yet.
Sharply lower oil prices are set to keep a lid on inflation, leaving the UK central bank in no hurry to raise rates above 0.5%, where they have remained for nearly seven years.
James Tucker, ONS head of CPI, said: “While still at historically low levels, CPI has today edged up to its highest rate for a year. The main reason for the slight rise in inflation was fuel prices falling by less in January than they did at the same point in the previous year.
Figures from the ONS show the retail prices index measure of inflation rose to 1.3% from 1.2% in December.
The Bank of England has forecast further increases in inflation, to 0.5% by the summer. But it is likely to remain low for much of this year, with oil more than 70% lower than its peak price in summer 2014.
Financial markets are not expecting interest rates to rise until the end of the decade amid mounting gloom over the global economy and the oil price rout.
The Bank cut its growth forecasts for the UK economy and voted to keep interest rates on hold at 0.5% at the beginning of this month.
It revised down its forecast for UK GDP for the next three years – to 2.2% for 2016, 2.4% in 2017 and 2.5% in 2018.
Global markets have been volatile in recent sessions, with banking stocks dragging the FTSE 100 into the red amid fears over the impact of slowing world growth, led by easing expansion in China, the world’s second largest economy. The London market is down by 8% since the start of this year.
Article: The Guardian