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WisdomTree comments on double whammy of bad inflation

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Reacting to the latest reading from the Office for National Statistics (ONS) revealing Consumer Prices Index (CPI) inflation rose to 1.8 per cent in January, Viktor Nossek, (pictured) dire

Reacting to the latest reading from the Office for National Statistics (ONS) revealing Consumer Prices Index (CPI) inflation rose to 1.8 per cent in January, Viktor Nossek, (pictured) director of research at ETF provider and sponsor WisdomTree, says: “There is a double whammy of ‘bad’ inflation coming through in the UK from both energy and food and this has caused a sharp jump in CPI over the last few months.

"On the energy side, suppliers are re-setting their prices at steeper levels amid a higher oil price environment, while bad weather conditions have pushed up the cost of imported foods. Meanwhile, the pound’s weakness has exacerbated the cost increases for both of these key components of inflation."

“However, while CPI inflation may breach the 2 per cent target in the near term, it is unlikely to soar much beyond that level because oil prices have so far lacked momentum, despite significant cuts to crude oil output by OPEC and non-OPEC members. Indeed, the signs are that economic activity could weaken in the near term as the UK’s dominant services sector is slowing down, keeping a lid on demands for higher wages. The 2 per cent target therefore represents something of a ceiling for CPI unless we see either of those dynamics change.”

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