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United Kingdom Inflation January 2021

United Kingdom: Inflation increases in January but remains mild

Consumer prices dropped a seasonally-adjusted 0.20% in January over the previous month, contrasting the 0.26% rise logged in December. January’s result marked the sharpest fall in prices since August 2020. The decline was broad-based, with lower price pressures recorded for recreation and culture, transportation, and housing and utilities. Moreover, clothing prices plummeted on increased discounting.

Inflation ticked up to 0.7% in January, slightly above December’s 0.6% but below the Bank of England’s 2.0% target. Annual average inflation edged down to 0.8% in January (December: 0.9%). Core inflation was steady, coming in at December’s 1.4% in January.

This year inflation is seen rising closer to the Bank of England’s 2.0% target due to a combination of higher energy prices, economic recovery, the expiration of last year’s temporary VAT cut and supply-chain pressure linked to Brexit.

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