Ian Forrest, investment research analyst at The Share Centre, comments on what the latest UK inflation figures could mean for investors
UK inflation remains higher than expected at 3%
Today’s inflation data showed that the headline CPI rate for January remained higher than expected in the first month of 2018, staying at 3.0%, which was above the 2.9% consensus forecast. The Office for National Statistics said one factor keeping inflation up was that the prices for some recreational activities such as visits to zoos and gardens fell by less than they did last year. On the other hand, fuel prices rose by less than they did a year ago although the rise in the price of oil over the past six months should gradually raise fuel prices in the coming months.
Many analysts have been expecting inflation to fall back over the past few months but it has remained stubbornly high. Some still believe it will begin to fall back as Sterling has strengthened over the last 12 months and the impact of the drop in the pound following the Brexit referendum has continued to unwind. The latest Bank of England inflation report also suggested that wages, a major influence on inflation, would rise faster than previously expected, in 2018. It also believes inflation will remain above its 2% target until 2021.
The initial reaction to today’s inflation data in the markets was fairly subdued with sterling rising modestly to $1.39 against the dollar and the FTSE 100 easing back 11 points to 7171.
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