Markets are pricing in about three interest-rate hikes over the next three years, with the first coming as early as May. Even that will leave “excess demand” and inflation above the 2 percent target, policy maker Gertjan Vlieghe said on Monday.
Auto-fuel prices rose less last month than they did a year earlier, and food prices fell for the first time since June. Upward pressures came from the recreation and culture sector, where prices posted their smallest January decline in five years. There was also some pressure from clothing prices as seasonal discounts failed to match those of a year ago.
Producer-price inflation continued to slow in January, with input prices rising 4.7 percent on the year and output prices climbing 2.8 percent. February may see a further slowdown as oil prices decline.
Annual house-price growth picked up to 5.2 percent, driven by Scotland and southwest England. London was again the weakest region, with values rising 2.5 percent.