British Inflation May Have Continued To Drift Lower

British Inflation May Have Continued To Drift Lower




U.K. inflation is likely to have slowed notably to a 14-month low in January, as the impact of the value added tax hike drops out of the annual comparison.
Annual inflation is seen falling to 3.6 percent in January from 4.2 percent in December. Nevertheless, the inflation figure is set to be well above the 2 percent target. The Office for National Statistics is scheduled to release the report on February 14.
IHS Global Insight's Chief UK economist Howard Archer expects consumer price inflation to trend down steadily to stand around 2 percent by the end of 2012 helped by the ongoing waning impact of sharply rising oil, commodity and food prices in late/2010/early-2011.
Core inflation that excludes cost of food, energy, alcoholic beverages and tobacco, is forecast to fall to 2.6 percent annually in January from 3 percent in December.
As inflation probably remained more than one percentage point above 2 percent for three straight months since Bank of England Governor Mervyn King wrote his last open letter, King is expected to write another letter to Chancellor George Osborne this week.
The BoE last week decided to pump additional GBP 50 billion into the economy to support growth. The central bank indicated that slowing inflation and muted wage growth provided scope for more quantitative easing. The bank retained its record low 0.50 percent interest rate.
The Inflation Report to be published on February 15 will provide more understanding about inflation and output projections and its future course of action on quantitative easing.



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