UK Inflation reaches 1.8%

UK Inflation hit its highest level in two and a half years in January, reaching 1.8% and bringing it closer to the Bank of England’s target rate of 2%. The central bank expects UK inflation to rise to as much as 2.7% by the end of the year, brought about primarily by Sterling’s depreciation. Food and transport were areas where inflation was felt the most, with prices rising, and set to rise, in order to keep up with the growing cost of imports. Inflation above the Bank of England’s 2% target is likely to hurt consumers spending power, assuming wage growth is unable to keep up. For the time being, the central bank appears to maintain a neutral stance on interest rates and has indicated that it will tolerate above target inflation, given the current environment. As the news was released, the FTSE 100 index remained flat, yet bond prices were rising, showing a moderate risk-off move as investors preferred safer assets.