CPI rate increases for first time in 6 months

The Consumer Price Index (CPI) rate of inflation has increased to 1.8 per cent over January, after hitting its lowest level in over three years in December 2019.

Figures published by the Office for National Statistics (ONS) showed the increase from 1.3 per cent in December to 1.8 per cent in January 2020, following five consecutive months of below target rates.

Furthermore, CPI including owner occupiers’ housing costs (CPIH) also increased to 1.8 per cent over January, increasing from 1.4 per cent in December 2019.

The figures also showed a year-on-year increase, with the CPIH 1-month inflation rate at -0.2 per cent in January 2020, compared to -0.6 per cent in January 2019.

Commenting on the rise, Quilter Investors portfolio manager, Hinesh Patel, said: “Following the latest inflation reading, the Bank of England (BoE) will feel vindicated for the pause they took on interest rates given this localised uptick.

“However, some key points remain that the BoE cannot shy away from.

“Firstly monetary policy remains at the mercy of the Brexit negotiations and broader developments in the global economy. Secondly, this change in data does not signal a trend-shift – inflation is still expected to fall as the year progresses."

However, Chatham Financial associate director, Andy Scott, added: “While the jump higher in January’s CPI number doesn’t in itself mean an end to the two-year downtrend in the pace of inflation, there were signs of upwards pressure on future prices that will likely put an end to any discussions of an imminent rate.

“The reduction in UK political instability and increased certainty over Brexit have driven renewed interest in the UK currency, along with an upturn in optimism over the UK economy”.

Housing, water, electricity and gas were noted as contributing to the rise in the CPIH rate by the ONS.

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