Markets

Stubborn inflation piles pressure on Bank of England to hike interest rates

Stubborn inflation piles pressure on Bank of England to hike interest rates

The market is down roughly 7 percent overall from its January 26 high.

That strong increase was almost matched by the January 2018 number, and year-over-year inflation remained stable at 2.1%.

This prompted markets to price in as much as a 70 per cent chance of a quarter-point rise in interest rates by May, and a roughly 50 per cent chance of a further increase in rates to one percent by the end of the year - a level last seen in 2009.

"The continued correction in prices of vegetables would dampen food and headline inflation in the ongoing month".

Sterling rose 0.5% against the dollar to 1.39 USA dollars following the news.

The increase in the core CPI brought the three-month annualized gain to 2.9 percent, the fastest since 2011, according to data compiled by Bloomberg.

Consumer price index (CPI) rose 5.07 percent in January from a year earlier, data released by the Ministry of Statistics showed on Monday. Inflation in the vegetable segment slowed to 26.97 per cent. Prices of fruits, too, rose at a lower pace of 6.24 per cent last month. It was trading at US$1.3892 by 1650 GMT, up 0.4 per cent on the day, having climbed more than six per cent against the dollar over the past three months.

Two soldiers martyred, 3 JeM terrorist killed in ongoing operation in Jammu
My heart goes out to the injured & their families, Jammu and Kashmir Chief minister Mehbooba Mufti tweets. An attack on the Sunjuwan army camp on 10th February morning shook Jammu and Kashmir .

Consumer durables and consumer non-durables have recorded growth of 0.9 per cent and 16.5 per cent, respectively.

Higher-than-expected inflation and weaker-than-expected consumer spending in January start the year off on the wrong foot, but clearly do no establish a compelling trend.

Retail inflation eased in January to 5.07 per cent - after touching a 17-month high of 5.21 per cent in December - as food price rise showed some moderation. "This adds further weight to the case for higher interest rates sooner rather than later", he said. The market shed more than $1 trillion in market capitalization in the days of trading this month as investors, for the first time in almost a decade, believe that central banks around the world will pull back on their recession-era easy money policies and raise interest rates to ensure that rapidly growing economies don't run too hot. The measure excluding food and energy is also below the Fed's target. Given that apparel prices change massively between December and January due to post-Christmas discounting, the entire difference may be a result of seasonal adjustment issues.

Fed policy makers will also have February CPI data in hand before they next meet March 20-21 in Jerome Powell's first gathering as chairman.

"Expectations that the Bank of England will raise interest rates in May will likely be fuelled by their regional agents reporting a pick-up in companies' expected average pay settlements", economist Howard Archer at consultants EY Item Club said.

On a monthly basis, the NBS said CPI in January 2018 dropped by 0.24 per cent points from the rate recorded in December (15.37 per cent).


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