Higher inflation unlikely to have immediate impact on United Kingdom property prices

17 February, 2017, 00:21 | Author: Alicia Barber
  • Consumer price inflation set to see upside pressure: Crisil

Food inflation was 0.53 percent last month, lower than a revised 1.37 percent in December.

Janet Yellen, chair of the Federal Reserve, ascribes the rise in inflation mainly to the gradual recovery in energy prices as well as stabilising import costs.

The gain was higher than a 5.5 percent rise in December and market estimates of 6.3 percent.

Wen Bin, an analyst at China Minsheng Banking Corporation, also warned of possible inflationary pressure from the strong PPI growth, predicting a tightening in the central bank's monetary policy.

The prospect of higher rates pushed USA financial stocks .SPSY 0.7 percent higher on Wall Street for their fifth straight day and lifted the benchmark S&P 500 index .SPX to another record.

Headline inflation has witnessed a rise for the second consecutive month weighted by higher commodity prices and adverse base effect.

Food inflation is also likely to cause more of an upset in the short term, as retailers continue passing on the higher cost of imported products, according to Pantheon chief United Kingdom economist Samuel Tombs. Excluding shelter costs, which rose 3.5 percent between January 2016 and January 2017, core inflation would've been only 1.3 percent.

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Oil prices have been on rise since OPEC in early December made a decision to cut output for the first time in eight years.

In January alone, food prices increased by 2.3%, led by a 3.4% jump in pork prices, a staple of the Chinese diet.

Margins for retailers also climbed sharply in January, though it is a volatile category that swings sharply from month to month and often skews the wholesale report.

Data on Monday showed India's retail inflation cooled to 3.17 percent last month, its lowest in at least five years. It was the largest monthly increase in over a year.

On Tuesday, Yellen hinted more rate hikes were on the way as the jobs market has improved and inflation has shown signs of nearing the Fed's two percent goal.

Deputy chief investment officer Chris Leyland said, 'Around £269bn is sitting in cash ISAs with Inflation at 1.8% compared to average high street cash ISA rates of 0.82%. The shelter index rose 0.2 percent, a smaller increase than in recent months.

The ONS said that sterling weakness, which has seen the pound fall by some 16% since the June Brexit vote, had contributed to increase in price across both categories. The food at home index was unchanged, while the index for food away from home rose 0.4 percent.

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