January CPI inflation at 5.07%; IIP sees 7.1% surge

2007 in London

Inflation stayed at three per cent last month

"There's no real outlier that suggests we're going to see a break one way or the other", said George Goncalves, head of fixed-income strategy at Nomura.

Sterling edged up against the dollar on Tuesday, continuing a modest rebound from three-week lows hit on Friday, as traders eyed United Kingdom inflation data for clues on when and how fast the Bank of England will raise interest rates.

"Although food inflation also showed some softening in the month of January 2018 to 4.6% from 4.9% last month, the prices of some key items consumed regularly remained at elevated levels", Principal Economist at India Ratings & Research Sunil Kumar Sinha said in a note.

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

"Inflation's now been above target for 12 straight months".

"UK inflation came in higher than expected in January, adding further pressure for (BoE) policymakers to hike interest rates again, possibly as soon as May", said IHS Markit economist Christopher Williamson.

Mr Brettell said it now looks like the next rise "may well happen in May".

But higher shop import prices, following the dramatic depreciation of the pound since the Brexit referendum, continue to make a deep impact (especially where price hikes are most obvious - in supermarket aisles and on fuel station forecourts).

The Consumer Price Index increased 0.5 percent in January, and 2.1 percent over the past twelve months, the Bureau of Labor Statistics reported Wednesday.

Food inflation, as measured by the Consumer Food Price Index, rose to 4.70 per cent in January from 4.96 per cent in the previous month.

The ONS reports the main upward effect comes from prices for a range of recreational and cultural goods and services, in particular, admissions to attractions such as zoos and gardens, for which prices fell by less than they did a year ago.

Petrol rose by 1.1p per litre on the month to 121p per litre, while diesel rose by 1p to 124.5p per litre. Headline CPI rose by 0.5% and core CPI (minus food and energy) by 0.3%.

The British Pound lost ground following the mixed data prints, with GBP/USD slipping below the 1.3750 region, but the move was short-lived as the pair ended the day at 1.3791.

In December, inflation fell to 3% from November's five-year high of 3.1%, its first drop since June 2017.

"Non-oil, non-gold imports (proxy for domestic consumption) is expected to have stayed strong at 24.6 per cent versus 12.8 per cent as domestic demand indicators such as auto and two-wheeler sales growth was strong in the month", it added. Housing prices remained firm, and surged 8.3% during the month.

The Bank's Monetary Policy Committee (MPC) last week said it is set to bring inflation back to the 2% target faster than previously expected.

The figure also fuelled warnings of another rise in interest rates from the Bank of England.

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