Consumer Prices Index released today by the Office for National Statistics (ONS) in the UK and it fell by 0.2 percent compared to the previous month, while it rose 0.7 percent in the 12 months to January 2021. The core consumer price index fell to minus 0.5 percent month-over-month, while it rose 1.4 percent year-over-year.



Biggest contributor was the furniture and household goods with an increase by 0.08 percent. Restaurants and hotels made the second-largest upward contribution of 0.07 percentage points to the change in the CPIH 12-month inflation rate between December 2020 and January 2021.  A large upward contributor with 0.06 percentage points to the change in the CPIH 12-month inflation rate, between December 2020 and January 2021, was food and non-alcoholic beverages. Another large upward contributor was transport with 0.04 percentage points. The main items that led to the decline in inflation prices on an annual basis were clothing and footwear with a rate of minus 0.13 percent, followed by communications and miscellaneous goods and services with a decline by minus 0.01 percent.

Downward contribution to the CPIH 12-month inflation rate from the clothing and footwear group increased in magnitude to 0.22 percentage points in January 2021. Food and non-alcoholic beverages also declined by 0.05 percent. The largest increase on a monthly basis was in recreation and culture by 0.35 percent, followed by transport by 0.27 percent, housing and household services by 0.19 percent, and other goods and services by 0.15 percent.

Effects of the restriction measures taken as part of the fight against the outbreak in the UK have been relatively impacted the Consumer Price Index (CPI) in January. Coronavirus restrictions, which have led to a weakening of household spending capacity over the period, are still in force and may remain there for some time, and in the near term it can be considered that they will put downward pressure on the overall level of prices.

On the other hand, expectations that the restrictions that have been on the UK's agenda in recent days will be lifted may affect households' spending capacity and reflect positively on expenditure behaviour in line with accumulated demand. In addition, along with the support package adopted by the financial authority to minimize the effects of the pandemic on the economy, the impact of near-zero interest rates and asset purchases implemented by the Bank of England could bring the Consumer Price Index to the target path in the second quarter of 2021.