Consumer prices are seasonally weak at the start of the year and this January was no different. However, a 0.5 percent monthly decline was a little shallower than expected and firm enough to leave the annual inflation rate unchanged at 3.0 percent, a full percentage point above target. The yearly rate has now posted 3.0 percent in four of the last five months.
The main downward pressure on the monthly change in the yearly CPI rate came from transport which subtracted 0.04 percentage points as fuel prices rose by less than in January 2017. Food and non-alcoholic drinks (minus 0.03 percentage points) had the other most significant negative impact. On the upside, the only boost of note came from recreation and culture (0.07 percentage points). The core CPI was down 0.8 percent versus December which saw the annual underlying rate jump a couple of ticks to 2.7 percent and so fully unwind its year-end fall. The CPIH, the measure preferred by the ONS, declined a monthly 0.4 percent for a flat yearly rate of 2.7 percent.
Coming just after the BoE's hawkish commentary last Thursday, today's January prices data will leave intact expectations that Bank Rate will be going up again before very long. The March 22nd MPC meeting is probably still a little too early but the acceleration in underlying inflation should ensure that May 10th remains firmly on investor radars.