Data from the Office for National Statistics (ONS) showed that the consumer price index held steady because increases in motor fuel and utility prices were offset by decreases in food and clothing costs.Although the target inflation rate remains two per cent, the latest figures are unlikely to increase pressure on the Bank of England to raise interest rates. Indeed, most of the pressure on rates in the short term is heavily dependent on the outcome of Brexit negotiations.

Inflation still above target

Laith Khalaf, a senior analyst at Hargreaves Lansdown, says that while the CPI remains above the target, it is "tolerable" at the moment.Laith Khalaf, senior analyst at Hargreaves Lansdown, commented: "Inflation is still above target, but tolerably so for the moment. The effect of weaker sterling has faded, but rising fuel and energy prices have taken up the baton in keeping inflation elevated. Moreover, wage growth is at its highest level since 2008, which suggests domestic inflationary pressures might start adding to the mix, too."Brexit is still the elephant in the room when it comes to the future path of inflation and, consequently, of monetary policy. That’s because the pound now waxes and wanes with the Brexit negotiations, and that has a big impact on how much UK consumers pay for imported goods."A disorderly Brexit would see the pound fall and inflation rise and, if you believe (governor of the Bank of England) Mark Carney, that could mean a rate hike or a cut. Meanwhile what the market sees as a positive Brexit deal will deliver a higher pound and lower inflation, and would most likely embolden the Bank of England to raise rates more aggressively. "It now looks like we are inching towards a resolution on Brexit, though there are many hard yards left to cover. The pound has duly rallied, but we have seen such gains given up before as political developments in the UK take a new turn. "Until more clarity on Brexit emerges, we can expect continued volatility in the pound, an ambiguous inflation outlook, and a central bank which is sitting firmly on its hands."

Rise in cost of goods and house prices

The ONS also reported that there has been a 3.3per cent rise in the cost of goods leaving factories in the year to October, up from 3.1 per cent in September. The increase in the cost of raw materials fell slightly to 10 per cent.Meanwhile, the ONS said UK house price growth had hit 3.5 per cent in the year to September, up from 3.1 per cent in August, with the average UK house price standing at £233,000.“House price growth ticked up a little as increases in Wales, Scotland and the midlands were to some extent offset by falls in central London,” said Michael Hardie, head of inflation at the ONS.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online DirectorySubscribe to Relocate Extra, our monthly newsletter, to get all of the international assignments and global mobility news.

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