Higher Oil Price Pushes UK Inflation To Two-Year High

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He said the probability of higher inflation remained a concern, with sterling's outlook likely dictated by expectations about the prospects for future rate rises. "Meanwhile, tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium-term".

For the month of November, 2016, the final Wholesale Price Index for "All Commodities" stood at 183.5 as compared to 183.1 (provisional) and annual rate of inflation based on final index stood at 3.38 percent as compared to 3.15 percent (provisional) respectively.

However, core inflation which reflects non-food, non-fuel items increased substantially, the highest in the last two years and 4 months.

Data released by the RAC at the beginning of this month showed fuel prices reached a two-year high last month, with petrol and diesel increasing by an average of 2p a litre at the pumps. "Despite the tumbling pound acting as a shock absorber for the economy in the wake of the Brexit vote, and strong industrial output and export figures, the MPC may hold fast until after Article 50 is triggered and business intentions are known".

This is the lowest level of inflation rate recorded since the new CPI series was launched in January 2014.

Food prices added 2.7 percent year on year in January, higher than the 2.4 percent gain in December because of the holiday effect, Sheng said.

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Furthermore 34 per cent of those surveyed claimed they expect inflation to happen more rapidly this year, compared to just 11 per cent thinking this in 2016.

The inflation rate was slightly lower than the 1.9% pencilled in by economists, sending the pound half a cent lower against the U.S. dollar.

The consumer price index rose 2.5% on the year in January, according to data released on Tuesday by the National Bureau of Statistics.

Rising fuel and food prices were seen as the main drivers. The figure was up 0.4 percentage point from December and above the market consensus of a 2.4% increase polled by Thomson Reuters.

Analysts had forecast inflation to jump to 1.9%, within arms length of the Bank of England's 2% target.

For the month, overall producer prices increased by 0.8%.