Published: Thu, February 15, 2018
World | By Paul Elliott

Inflation Drops To 15.1%, 13th Consecutive Month Since January

Inflation Drops To 15.1%, 13th Consecutive Month Since January

The U.S. central bank raised interest rates three times in 2017 and forecast three increases in 2018.

Separately, a report showed US retail sales decreased 0.3 percent last month, the biggest fall in almost a year and a surprise drop compared with economists' expectations of a 0.2 percent increase.

"This time around we are working on the assumption that the transport services category, air fares particularly, will apply some upward pressure to the 12-month inflation rate, with the month-to-month drop in prices likely to be less than in January past year", she said.

"Monetary policy is still likely to depend on first quarter US GDP data but if it proves to be as strong as some suggest, the Fed well take a significantly more hawkish path back to normal interest rates than expected, especially if inflation continues to creep up".

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

Annual inflation in the United Kingdom was at 3.1 percent in November and 3 percent in December previous year.

The report read in part, "The Consumer Price Index, which measures inflation, started the year 2018 increasing by 15.13 per cent year-on-year in January 2018".

As per use-based classification, the growth rates in December 2017 over December 2016 are 3.7 per cent in primary goods, 6.2 per cent in intermediate goods and 6.7 per cent in infrastructure/construction goods. That was higher than estimates for a 0.3 percent increase and the 0.2 percent in December.

The CPI in January 2018 according to the report, therefore, dropped by 0.24 percent points from the rate recorded in December.

Inflation has now held above the BoE's crucial 2.0-percent target level for 12 successive months.

Both measures show that inflation is mostly contained, but the increase in core prices will likely make investors nervous. "So this could set off another round of selling as some investors fret about what it means for United States interest rates".

Consensus anticipates a 0.3% increase in the CPI headline for January following a 0.2% rise in December. The cumulative growth in these three sectors during April-December 2017 over the corresponding period of 2016 was 2.8, 3.8 and 5.1 percent respectively. The logic goes that the trend of a rising CPI could lead the Fed to ease up on its fiscal stimulus by raising interest rates.

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