UK inflation climbed to its highest in a year in January, driven by motor fuels, food and clothing. Consumer prices rose an annual 0.3 per cent following a 0.2 per cent gain in December, in line with the median forecast of economists in a Bloomberg survey.

Core inflation, which excludes volatile food and energy prices, slowed to 1.2 per cent from 1.4 per cent, the figures from the Office for National Statistics in London show.

Inflation remains well below the Bank of England’s 2 per cent target. With oil prices remaining near a 12-year low and pay pressures weakening, officials say that the economy doesn’t yet warrant a rate increase from a record-low 0.5 per cent. Central to the outlook for rates is pay growth, which has come off the boil in recent months despite unemployment reaching a decade low. The statistics office will report data on jobs and wages on Wednesday. The main driver behind the pickup in inflation last month was motor fuel, which fell less than a year earlier. These pressures were partially offset by air fares, which fell 36 per cent, more than they did a year ago, following an upward surge in December.

Weak cost pressures

The pound gained after the report and was trading at $1.4486 as of 9:47 a.m. in London, up 0.4 per cent from Monday. In their February inflation report, BOE officials said they see inflation at 1.2 per cent in the first quarter of next year, down from a projection of 1.5 per cent in November. On the month, consumer prices fell 0.8 per cent, with core prices declining 1 per cent. Separate figures show producer prices falling 0.1 per cent in January as input costs declined 0.7 per cent. House-price growth slowed to 6.7 per cent in December. For 2015 as a whole, house prices rose 6.7 per cent.

Bloomberg