Industrial output expands by 7.1% in Dec

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The central bank's statement was less hawkish than many expected, and prompted some economists to change their predictions of a rate increase in the next few months.

While retail inflation growth for January slowed to 5.07% from the 17-month high of 5.21% reported in December 2017, the Index of Industrial Production (IIP) grew 7.1% in December 2017.

Roll back a month and the rate of United Kingdom inflation hit a six-month high of 3.1% in November.

"There is so much noise by the policymakers in the market that, ok, perhaps the United Kingdom is ready for another interest rate hike -by no means is the United Kingdom economy ready for another interest rate hike", Aleem said. The 10-year was at 2.82 percent ahead of the report. However, it was healthier than the 2.4% growth clocked in the year-ago period. "The fact that interest rates could move up so quickly is a legitimate reason for the market to get spooked". No one's sticking their neck out among the forecasters.

"Some of laws of normal economic nature seem to be reasserting themselves", Nathan Sheets, chief economist for PGIM Fixed Income and a former Fed and Treasury official, said on Bloomberg Television.

"The dip in the CPI inflation was led by food and beverages, pan, tobacco and intoxicants, and fuel and light", said Aditi Nayar, principal economist at ICRA.

Over the same period, inflation, as measured by CPI was 2.7 per cent and was four per cent as measured by RPI.

Stanley expects inflation to firm, with a higher-than-consensus forecast for headline CPI at 0.4 percent.

Inflation in the food and beverages segment of the CPI eased marginally to 4.58% in January, from 4.85% in the previous month.

On a month-over-month basis, CPI fell 0.5% in January, less than the 0.6% fall predicted after rising 0.4% a month earlier.

"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". That strong pay number spooked investors, sparking a sell-off that knocked stocks down 10% from their January 26 peak and into correction territory for the first time in two years. There are also retail sales for January at 8:30 a.m., another usually important number.

Inflation was largely dormant for most of the past decade, but inflation fears - at least in the financial markets - have roared back this year.

United Kingdom inflation is starting to slip - but not as fast as many would like.

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

"We think the increase in core inflation is a sign of things to come over the rest of the year", said Michael Pearce, U.S. economist at Capital Economics. The Fed follows a different inflation gauge, which hasn't consistently topped 2 percent for six years.

Sterling jumped to as high as US$1.3924 after the data, up from US$1.3886 beforehand. But they are yet to reach last year's profitability levels.