Wednesday 17 February 2021 7:25 am

UK CPI creeps up during January lockdown

The UK’s Consumer Prices Index was 0.7 per cent in January, the Office for National Statistics said on Wednesday.

Rising prices for food, transport and household goods helped to drive the increase.

January’s figure was up slightly from December’s reading of 0.6 per cent despite a return to national lockdown restrictions.

Inflation remains a long way below the Bank of England’s target of 2 per cent.

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Melissa Davies, chief economist at Redburn, believes rising commodity prices and supply chain pressures should put a powerful but temporary upward pressure on inflation.

“The effect will be very marked in the US but more tempered in European countries in general where the economic backdrop is less robust,” she said.

“There is little for the Bank of England to worry about on the inflation front but more support to the economy as the furlough rolls off and companies continue to digest the impact of changed trading relations would be helpful.”

Samuel Tombs, chief economist at Pantheon Macroeconomics, believes the January increase signals a year of rises in 2021.

“Looking ahead, CPI inflation likely will edge up in February and March, as the recent surge in oil prices is passed on swiftly to motorists,” he said.

“Thereafter, it likely will jump to about 1.8 per cent in April, primarily in response to base effects from the collapse in oil prices last spring, as well as a 9 per cent increase in the default tariff cap for electricity and natural gas prices.”

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