LONDON (Reuters) – British inflation rose in January as locked buyers paid more for food and retailers of furniture and other household goods offered lower-than-normal New Year’s discounts for people wanting to spruce up their homes.
The 0.7% annual rise in consumer prices is expected to pick up pace in the coming months – pushed up by the end of the emergency tax break and possibly the impact of Brexit – and could exceed the 2.0 target % Bank of England this year.
Economists said there was little pressure on the central bank to think about reversing its stimulus plans.
However, yields on British 10- and 30-year government bonds recently extended their climb and hit a record high of March 2020 as investors prepare for higher inflation and more fiscal stimulus in the United States. United.
“Inflation rose slightly in January, with food prices soaring. Household goods were also pushing up prices with less discounts this year on items such as bedding and cottages, ”said ONS statistician Jonathan Athow.
Analysts predicted by Reuters predicted that the consumer price index would remain at a 0.6% rise in December.
Food and drink prices rose 0.6% between December and January – up from a 0.2% fall over the same period a year earlier – while furniture and household goods fell 1.5%, less than a 3.3% year-over-year fall before that.
In contrast, clothing and footwear prices fell the most between December and January in seven years when retailers, with their stores closed, were trying to cut stocks.
The impact of the disease on British shopping practices has led to pressure on the basket of goods and services used by the Office for National Statistics to work out inflation.
Food and furniture now have a greater impact on the index while air fares and cinema tickets now account for less.
The ONS said the overall impact of the change had little impact on the CPI.
INFLATION TO RISE, BOE TO WAIT
British inflation has been below the BoE’s 2% target since mid-2019 and came close to zero last year when the economy collapsed.
The BoE expects it to accelerate in the spring as last year’s crisis cut in value-added tax for the hospitality sector comes to an end and rising global oil prices are expected to recover.
But the BoE has insisted there will be no rush to start removing its massive stimulus.
Yael Selfin, an economist at KPMG, said that inflation could remain below 2% in 2021 and 2022, “allowing a longer period of low interest rates to support the economic recovery. ”
Economists believe prices for some imports will rise as a result of Britain ‘s new, less open trade relationship with the European Union, which caused unrest and delays at ports last month.
The ONS said it had seen no evidence that current Brexit-related taxes and transportation costs pushed up consumer prices in January.
But Samuel Tombs, at Pantheon Macroeconomics, said higher annual price increases for furniture and household appliances could reflect higher travel costs and Brexit.
A basic version of the CPI, excluding volatile fuel and food prices, was stable at 1.4%.
Factory gate prices fell again, falling 0.2% year-on-year, and the volume for basic product prices rose 1.4%.