Britain’s annual inflation rate held at 3.0 percent in January, official data showed Tuesday, piling more pressure on the Bank of England to hike interest rates soon, according to economists.
The news comes less than one week after the Bank of England (BoE) warned that it could lift interest rates more quickly than expected to help bring down inflation.
‘The Consumer Prices Index (CPI) 12-month rate was 3.0 percent in January 2018, unchanged from December 2017,’ the Office for National Statistics (ONS) said in a statement.
The rate had hit 3.1 percent in November, which was the highest level in almost six years.
Analysts had however expected the January print to show a slightly lower rate of inflation at 2.9 percent.
The ONS said that smaller increases in food prices were offset by a pick-up in prices for clothing, footwear and recreation.
‘UK inflation came in higher than expected in January, adding further pressure for (BoE) policymakers to hike interest rates again, possibly as soon as May,’ said IHS Markit economist Christopher Williamson.
‘However, with mounting signs of economic growth slowing at the start of 2018, a May rate rise is by no means a done deal and will likely be dependent on the data flow improving in coming months.’
Inflation jumped last year and remains at an elevated level after Britain voted to leave the European Union in 2016.
The Brexit referendum pushed down the pound, in turn hiking the cost of imported goods.
As a result, the Bank of England raised its main interest rate in November 2017 for the first time in a decade. However, it chose to keep the rate at 0.50 percent in both December and January.
Inflation has now held above the BoE’s crucial 2.0-percent target level for 12 successive months.
‘This adds further weight to the case for higher interest rates sooner rather than later,’ said Ben Brettell, a senior economist at stockbroker Hargreaves Lansdown.
He added: ‘Policymakers said last week (that) they will try and bring inflation back to target more quickly than previously expected, which means rates could rise faster and further than anticipated.’
Brettell also noted that it now appears that the next interest rate increase ‘may well happen in May’.