UK Inflation Remains Stable At 3%

by Susie Olson February 14, 2018, 18:40
UK Inflation Remains Stable At 3%

The report sent Treasuries and stocks tumbling, as it added to concerns about an inflation pickup that have roiled financial markets this month.

While Sheets said he wouldn't raise his outlook for the path of inflation, the report "gives me increased confidence that we are in a place where inflation is likely to be gradually rising more or less in line with the Federal Reserve's forecast and consistent with an economy where we are seeing diminished slack, strengthening labor markets, solid growth".

Across the board, stock futures dropped instantly after news broke Wednesday.

The report said the annual food price index and food price pressure continued into December though generally at a slower pace year-on-year.

In terms of the United Kingdom nations, average prices in England rose 5.0 per cent to a typical £244,000; Wales saw an increase of 5.4 per cent to stand at £154,000; in Northern Ireland prices grew 4.3 per cent to £130,000.

The recent market correction started in the United States, largely driven by its own concerns over rising wages, and a number higher than the 0.3% month-on-month forecast could be taken negatively by the market.

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Core prices are predicted to rise to 2.6% from 2.5%, while producer input prices for January are expected to remain sticky with an expectation that they will fall back to 4.1% from 4.9%.

The year-over-year increase in prices was moderated by sharp price increases in January 2017, when headline inflation rose 0.6%, the sharpest rise in four years. My guess is that inflation will continue trending higher, but moderately.

Retail inflation in India slightly eased last month from a 17-month high in December, but the data is likely to offer only little relief to policymakers battling the fallout of government's expansionary budget. Industrial production grew at a cumulative 3.7 per cent in April-December 2017-18. That broke a three-month string of flat or negative non-seasonally adjusted inflation.

The rate was about 15.37 per cent in December 2017, from about 18.72 per cent in January 2017. The December gain in the main index was revised upward to 0.2 percent from 0.1 percent.

While economists and investors have seen a Fed interest-rate hike in March as a near-certainty, the details of the latest CPI report could play a role in the timing and number of rate increases throughout 2018. Lots to think about. The latest January PMI data would appear to show an economy that has hit a bit of a soft patch, yet for all of that, the tone of last week's inflation report would suggest that the MPC may well be more anxious about the inflation outlook than they would like to admit. Without apparel, the core reading would have been just 2.4% rather than 3%. The BoE has said it expects pay growth to accelerate in 2018, and this is yet another reason higher interest rates are on the table.

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