Consumer inflation remained unchanged at 3.0%y/y for the second consecutive month in January. Meanwhile, core inflation which excludes energy, food, alcohol, and tobacco rose 2.7% y/y while the producer price eased to 2.8%y/y in January. Inflation rose following the UK's vote in 2016 to leave the EU that led to a sharp fall in pound hence fuelling the prices of goods. Looking into 2018, the inflationary pressure should start to ease as the impact from a sharp plunge in pound fizzles out. Though it should give some breathing space for the central bank to delay any rate hike, they have turned hawkish and signalled the need for an earlier interest rate hike and potentially larger. Thus, any rate hike in 2018 should see the current policy rate of 0.50% reaching 1.00%. For that to happen, there must be a strong conviction that the economy is doing well and is being backed politically. The first rate hike in 2018 by the central bank could be as early as May.

• Consumer inflation remained unchanged at 3.0%y/y for the second consecutive month in January. Despite registering moderate gain in the prices of food and transportation, up 3.7%y/y and 3.4%y/y respectively in January compared to 3.9%y/y and 3.8%y/y respectively in December 2017, the sticky inflation print was due to higher recreation and culture which rose faster by 3.3%y/y from 2.7%y/y in December 2017.

• Meanwhile, core inflation which excludes energy, food, alcohol, and tobacco rose 2.7% y/y in January from 2.5% y/y in December. Also we noticed the producer price eased to 2.8%y/y in January compared to 3.3%y/y in December 2017, following the subdued cost of food. Inflation rose following the UK's vote in 2016 to leave the European Union that led to a sharp fall in pound hence fuelling the prices of goods.

• Looking into 2018, the inflationary pressure should start to ease as the impact from a sharp plunge in pound fizzles out. Though it should give some breathing space for the central bank to delay any rate hike, they have turned hawkish and signalled the need for an earlier interest rate hike and potentially larger. Thus, any rate hike in 2018 should see the current policy rate of 0.50% reaching 1.00%. For that to happen, there must be a strong conviction that the economy is doing well and is being backed politically. The first rate hike in 2018 by the central bank could be as early as May.

Source: AmInvest Research - 14 Feb 2018