Inflation flatlines at 3% in January: ONS

Inflation flatlines at 3% in January: ONS

Inflation flatlines at 3% in January: ONS

There are fears that inflation could force the Fed to be a bit more aggressive in its monetary policy, raising rates probably more often than the three times now anticipated for 2018.

Last week, the Bank of England indicated interest rates might rise sooner than expected when it said it wanted to get inflation closer to 2% within two years rather than three.

The Labor Department said its Consumer Price Index increased 0.5 percent last month as households paid more for gasoline, rental accommodation and healthcare.

Economists have also stated that aside from supporting interest rates being pushed higher in the near future, inflation may also possibly take over from the price increases related to the British pound seen by the market after the Brexit vote which would lead to growing acceptance for a monetary policy tightening.

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The latest strong inflation report could put more pressure on USA financial markets, which have been spooked by expectations of faster-than-expected increases in interest rates. The cumulative growth in these three sectors during April-December 2017 over the corresponding period of 2016 has been 2.8 per cent, 3.8 per cent and 5.1 per cent, respectively.

This afternoon a flurry of U.S. data will be released including the latest Consumer Price Index and Retail Sales data.

Furthermore, the economist expects the combined fiscal deficit to widen significantly this year fueling aggregate demand and inflation expectations.

"We expect headline CPI inflation to moderate to 5 per cent year-on-year in January from 5.2 per cent in the previous month, after rising consecutively for five past months", it said.

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The CPI in January 2018 according to the report, therefore, dropped by 0.24 percent points from the rate recorded in December.

"The bank's rhetoric echoed that of September's meeting minutes, which preceded last November's rate hike, and it now looks like the next rise may well happen in May". Wall Street will be watching another inflation indicator, the producer price index, on Thursday. However, the year-on-year rise was unchanged at 1.8 percent. Prices were forecast to gain 4.1 percent. Excluding volatile food and energy prices, the index was up 0.3% against estimates of 0.2%.

Interest rates have been historically low for years.

The NBS said urban inflation rate rose by 15.56 per cent in January 2018 from 16.78 per cent in December 2017, compared with the rural inflation rate, which declined by 14.76 per cent in January 2018 from 15.02 per cent in December 2017.

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