The central bank has set an inflation target of 2.8 per cent for the last quarter of the current financial year ending March 31. They expect the Office for National Statistics to announce at 9.30am that the headline CPI rate slipped to 1.9 per cent, largely thanks to easing energy inflation.
Mike Hardie, head of inflation at the ONS, 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 a year ago.
"On the downside, we see the most significant support line at 1.1295: we note last month's low, the Fibonacci 61.8% one-day, and the PP one-month Support 1, all substantial lines", he added further.
The top two year fix from Gatehouse Bank pays 2.35 per cent, now some 0.55 percentage points above inflation. "This reflected the imposition of a new cap on Standard Variable Tariffs, which was 6% below prior average levels".
- As petrol and Ofgem cap weigh on main consumer price index.
He said: "Lower inflation in January reinforces the recent improvement in consumer purchasing power following firmer earnings data". Retail inflation based on the Consumer Price Index (CPI) for December 2018 has also been revised downward to 2.11 per cent from the earlier estimate of 2.19 per cent.
Inflation was dragged down by lower energy and fuel prices.
It still maintained the line that interest rates will need to rise "at a gradual pace and to a limited extent" over the coming years in order to ward off mounting price pressures, but the lower GDP and inflation forecasts led markets to believe the BoE thinks rates will rise by less than was previously the case.
Economists said it facilitated the Bank's "wait and see" approach on interest rate hikes ahead of Britain's departure from the EU.
If the Withdrawal Agreement is not ratified before March 29 then the United Kingdom will automatically leave the European Union and default to doing business with it on World Trade Organization (WTO) terms, which analysts say would be bad for the economy. The fall in the value of the pound after the Brexit vote had pushed inflation higher, squeezing household disposable income as it pushed up the cost of imported goods.
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