Figures from the ONS have shown that inflation has risen to its highest rate since June 2014.
While fuel and food prices were the drivers behind the spike, clothing and footwear costs fell compared to a year ago. Though this looks certain to rise in the coming months
The rise to 1.8% is just 0.2 percentage points off the Bank of England target of 2%. Given the current decline in sterling, leading to increased raw material and fuel costs, inflation looks likely to increase beyond the Bank Of England’s target figure by the end of 2017.
The trend is clearly towards higher inflation, however, and we should expect the rate of price increases to rise above the 2% Bank of England target in the next few months. By the end of this year, inflation is likely to be around 3% and possibly even higher. Rising energy prices and the weakness of the pound are the main factors behind this expected increase.
CPI 12-month inflation rate for the last 10 years: January 2007 to January 2017
Source: Office for National Statistics
The last time inflation hit 2% was during December 2013. Petrol, which was cited in the most recent increase, was on average 1.30p a litre according to the AA Fuel Report. The average price for a litre of unleaded in January 2017 was 119.5p.
You’d need to go back to April 2012 to find inflation at the 3% mark – although there were brief flirtations with this figure between February and July in 2013. Then it reached 2.8% in February, March and July as it peaked during June at 2.9% in that year.