India's January inflation pace drops; RBI could cut rates again

Kenny Grant
February 13, 2019

The biggest monthly fall for gas prices since the 1980s helped drag down United Kingdom inflation to the lowest level in two years in January as the government's energy price cap came into effect.

Core consumer inflation, which strips out food and fuel prices, was estimated at about 5.4 percent in January, slightly softer than a downward revised December figure of 5.6 percent, according to an estimate made by two analysts from inflation figures released on Tuesday.

The Consumer Food Price Index declined to 2.17% in January.

The MPC, which mainly monitors retail inflation data, also revised down its inflation projections for the period from April to September to 3.2 percent to 3.4 percent, from 3.8 percent to 4.2 percent.

This is down from 2.1% the previous month.

Despite the fall in inflation since late 2017 and the fastest wage growth in a decade, businesses have reported a downturn in consumer spending in recent months.

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Prices of vegetables stood at (-) 13.3 percent versus (-) 16.14 percent a month ago while pulses contracted (-) 5.5 percent in January from (-) 7.13 percent a month ago.

Howard Archer, the chief economic adviser to the EY Item Club, said he expects inflation to stay modestly below 2% for much, if not all, of 2019: "We see inflation averaging 1.8% over 2019 and it could very well get as low as 1.6% during the year".

British inflation fell to a two-year low in January, dipping below the Bank of England's target and offering some relief to consumers who have tightened their belts ahead of Brexit.

Headline inflation in India has been pulled down to a large extent by low food prices. Growth in the mining sector declined 1%.

The biggest ever monthly fall in gas prices since comparable records began in 1988 coincided with the start of energy regulator Ofgem's cap on household bills. Prices of health related goods increased 8.93% while education related goods rose by 7.99%.

Manufacturers' raw materials costs were 2.9 percent higher than in January 2018, the slowest increase since June 2016, the month of the Brexit referendum.

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