Easing core inflation could push RBI to cut rates again

Retail inflation at 19-month low in January industrial output up 2.4% in December

Retail inflation eases to 2.05% in January

Retail inflation stood at 2.05 percent in January 2019 compared with a revised 2.11 percent in December 2018, according to data by the Ministry of Statistics and Program Implementation.

The main driver for inflation was the new energy price cap on standard variable tariffs recently introduced by energy watchdog Ofgem.

The best one-year fixed-rate account, offered by Sharia bank Al Rayan, pays 2.17 per cent, beating inflation by 0.37 percentage points.

"We continue to think the Bank of England would press ahead with interest rate hikes if a Brexit deal is reached despite today's slip in inflation below target", Andrew Wishart, from Capital Economics said.

Before last month, the last time a one-year fixed-rate matched inflation was November 2016, and back then the CPI was only 1.2 per cent.

The CPI including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 1.8 per cent in January, down from 2 per cent in December.

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 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 retail inflation number was much lower than the market expectations, said Tushar Arora, a senior economist at HDFC Bank.

The Bank of England said this month that United Kingdom economic growth will likely slow further in 2019 given weakening demand from overseas and a period of increased "Brexit uncertainty" that are expected to reduce activity in the UK.

Inflation was dragged down by lower electricity, gas and petrol prices between December and January, which was partially offset by lower air fares.

Brexit pandemonium in parliament and uncertainty over the shape of the UK's future relationship with the European Union is the only thing keeping the Bank of England from raising rates again, most economists say, given the United Kingdom is due to depart the EU on March 29.

India's consumer prices rose at a milder pace than anticipated in January and remained below the Reserve Bank of India's target for a sixth straight month, strengthening views it could again cut the key interest rate at its next policy review in April.

United Kingdom inflation rose from 0.5% in June 2016 to 3.1% by November 2017 and core inflation increased from 1.4% to a peak of 2.7%.

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