Higher Oil Price Pushes UK Inflation To Two-Year High

United Kingdom inflation has reached its highest rate since June 2014, mainly due to the increasing cost of fuel and food.

The Consumer Prices Index rose by 1.8% in the year to January 2017, up from 1.6% in the year to December 2016, according to the latest ONS statistics.

"But the honeymoon of rock-bottom price rises is now over with inflation having doubled since October, and set to increase further in the coming months".

Danske Bank economist Conor Lambe said the inflation rate was moving closer to the Bank of England's 2% target.

Data released by the RAC at the beginning of this month showed fuel prices reached a two-year high last month, with petrol and diesel increasing by an average of 2p a litre at the pumps.

United Kingdom consumer price inflation accelerated to a 31-month high and input prices surged the most since 2008 in January, as a weak pound pushed up imported prices. Stripping energy and food, personal consumption rose 0.4 percent month-on-month and 1.2 percent year-on-year.

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Inflation looks set to breach the central bank's 2% target next month, Paul Hollingsworth, a United Kingdom economist at Capital Economics, said.

Shore Capital analyst, Clive Black, noted: "Looking to future expectations, it would be pretty non-consensual and indeed foolish not to expect inflationary momentum not to remain the stronger forces for the next few quarters".

And with factory gate prices on the rise, there's signs that those upstream price pressures are now being passed on to consumers.

Food inflation was in the negative zone for the second month running, with index down 0.56% in January from that a year ago.

Data on Monday showed India's retail inflation cooled to 3.17 percent last month, its lowest in at least five years.

Producer price inflation rose to 6.9%, from 5.5% in December. However, the price of jute sacking bag (1 per cent) declined. This significant increase in inflation has come from a substantial increase in the prices of fuel and power and marginal increase in prices of manufactured goods (over previous month). The annual rate was also faster than the expected 6.6 percent.

  • Darren Santiago