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UK inflation 'expected to ease' | UK inflation 'expected to ease' |
(about 5 hours later) | |
Economists are expecting Britain's inflation to have eased slightly in January, after a jump in the rate to an 11-year high in the previous month. | Economists are expecting Britain's inflation to have eased slightly in January, after a jump in the rate to an 11-year high in the previous month. |
The Consumer Prices Index is expected to dip to 2.9% from 3%, when official figures are published on Tuesday. | The Consumer Prices Index is expected to dip to 2.9% from 3%, when official figures are published on Tuesday. |
The Bank of England has raised interest rates three times since August in a bid to bring inflation down to a 2% target. | The Bank of England has raised interest rates three times since August in a bid to bring inflation down to a 2% target. |
Price pressures could ease this year as fuel costs fall, but many analysts believe a further rate rise is likely. | Price pressures could ease this year as fuel costs fall, but many analysts believe a further rate rise is likely. |
'Concerns' | |
"With inflation likely to remain high through the first quarter, and the Monetary Policy Committee (MPC) sensitive to the upside risks to its inflation objective, our forecast anticipates a further move upward in interest rates at one of the next two meetings," said JP Morgan economist Malcolm Barr. | |
A further rise in inflation to one percentage point above 3% would require Bank of England Governor Mervyn King to write a letter to the government explaining the reasons behind the increase. | A further rise in inflation to one percentage point above 3% would require Bank of England Governor Mervyn King to write a letter to the government explaining the reasons behind the increase. |
No governor has so far had to do so since the Bank was given control of setting interest rates a decade ago. | No governor has so far had to do so since the Bank was given control of setting interest rates a decade ago. |
December's increase in consumer price inflation was mirrored by a rise in the Retail Prices Index - which includes mortgage interest payments and is often used as a basis for wage demands - to 4.4%, its highest level since 1991. | December's increase in consumer price inflation was mirrored by a rise in the Retail Prices Index - which includes mortgage interest payments and is often used as a basis for wage demands - to 4.4%, its highest level since 1991. |
Philip Shaw, chief economist with Investec Securities said he expected the inflation numbers to be a relief for Mr King. | |
"The news should soothe some of the MPC's concerns," he said. | |
But he added that seasonal food prices were tipped to be higher last month. and reductions on clothing and footwear were less dramatic than they had been in the sales a year earlier. | |
Mr Shaw said he though inflation would remain "uncomfortably high" until March, when the impact of energy prices would be seen. |