Sterling rises after United Kingdom inflation beats expectations

Sterling rises after United Kingdom inflation beats expectations

Sterling rises after United Kingdom inflation beats expectations

According to the Office for National Statistics (ONS) today, UK's consumer price inflation (CPI) remained at three per cent in January - unchanged from December last year- which is higher than the 2.9 per cent that the City had expected.

The yield on 10-year Treasuries rose to 2.86 percent, while US stock futures fell, as the figures renewed investor concerns that the Federal Reserve will raise interest rates at a faster pace than anticipated.

Economists were pencilling in a drop to 2.9%.

"House price growth increased slightly, driven by rises in Scotland and the South West".

Hargreaves Lansdown senior economist Ben Brettell added: "Inflation has now been above target for 12 straight months".

Stronger inflation readings will likely cause interest rates to move higher.

"The BoE's rhetoric echoed that of September's meeting minutes, which preceded last November's rate hike, and it now looks like the next rise may well happen in May". However, concerns about rising inflation, albeit particularly in the U.S., have caused market wobbles since the end of January as investors worry about the impact of central banks tightening monetary policy.

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".

"After last week's falling share prices, high inflation will put a second dent in the spending power of pensioners whose pots are invested in the stock market".

At the pumps, petrol prices rose by 1.1p per litre on the month to 121p per litre, while diesel rose 1p to 124.5p per litre.

The fact that consumer prices index stayed at 3 per cent showed inflation to be sticky.

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

The pound skidded to a three-week trough below US$1.38 on Friday after the EU's chief Brexit negotiator Michel Barnier warned a transition deal was far from assured. Inflation could fall away more sharply than expected between now and May.

On a monthly basis, overall consumer prices fell 0.5 percent compared to expectations of 0.6 percent drop. Food prices rose a moderate 0.2%.

A separate food price index showed inflation at 18.92 percent in January, compared with 19.42 percent in December.

India's industrial production growth declined again in December to 7.1% from a high of 8.8% in the previous month but the retail inflation bettered in January after a 17-month high in the previous month. At this point, with two months remaining, inflation has increased 0.42%, which would result in a new variable rate of 0.84%, well below the current rate of 2.48%.

The Food Index stood at about 18.92 per cent (year-on-year) in January 2017, down from the rate recorded in December (19.42 percent).

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