The Consumer Price Index dropped from 2.1 per cent in December – the largest drop in Consumer Price Inflation since 2016 and falling below the Bank of England’s two per cent target for the first time since 2017.
The Office for National Statistics (ONS) says UK inflation fell to a two-year low of 1.8 per cent in January. They say the fall was led by a downward trend in prices of electricity, gas and other fuels.
Head of inflation at ONS Mike Hardie said: “The fall in inflation is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time last year.”
Yael Selfin, Chief Economist at KPMG UK, says: “January saw the largest drop in Consumer Price Inflation since 2016, as lower energy prices and sharper discounts on clothing and footwear saw inflation fall well below the Bank of England’s target to 1.8%.
“The latest inflation figures give the Bank of England ample room to wait before it raises interest rates again. In the current climate of heightened uncertainty in regards to the Brexit process, businesses will benefit from a supportive monetary policy.
“Waning UK business investment, and potential short-term financing difficulties for many SMEs in the event of a no-deal Brexit, will require the Bank of England to keep rates low this year, and the latest inflation figures provide the MPC with a mandate to do that.”