In the UK, inflation fell to its lowest level in two years, providing households with help before Brexit

LONDON (Reuters) – British inflation fell to its lowest level in two years in January, fell below the Bank of England's target and relieved homeowners who tightened their belts. before Brexit.

Consumer prices rose at an annual rate of 1.8% in January, after rising 2.1% in December, the Office for National Statistics announced on Wednesday. A poll of Reuters economists had forecast 1.9%.

Inflation has put pressure on British consumers after the British pound fell more than 10% against the dollar and the euro since the Brexit referendum in June 2016.

Inflation peaked at 3.1%, the highest level in five years, in November 2017, when UK households faced much higher price increases than the EU average. .

This difference is now negligible, but economists believe that stronger inflation could come back in the event of a Brexit without agreement.

"The further decline in inflation allows the Bank of England to maintain a wait-and-see interest rate approach until the UK leaves the EU," said Howard Archer, chief economic adviser to the UK. consulting firm EY ITEM Club.

Last week, the BoE had said inflation would fall below 2.0% in the coming months, partly because of falling oil prices.

The pound sterling has changed little against the dollar and the euro, but British government bond prices have risen, resulting in a 10-year yield decline of 2 basis points.

Despite the decline in inflation since the end of 2017 and wage growth at its highest level in a decade, companies have reported a slowdown in consumer spending in recent months.

Surveys show that households are worried about prospects for 2019 and that Britain is about to leave the Union on March 29 without any agreement unless Prime Minister Theresa May can negotiate a revised agreement with the EU that would be accepted by his divided party and his parliament.

January's drop in inflation is mainly due to lower energy prices, "partly offset by higher prices for ferry tickets and airfares, which fell more slowly than last year" said ONS statistician Mike Hardie.

The ONS figures also suggest less short-term pressure on consumer prices.

Among the manufacturers, the cost of raw materials was 2.9% higher than in January 2018.

This annual increase has been the slowest since June 2016, the referendum month on Brexit. Economists polled by Reuters were expecting a 3.8% rise in input prices.

Nevertheless, households face higher bills for the most part. On Wednesday, Npower became the third of the UK's top six energy providers to raise prices after announcing a new, higher price cap on the part of the regulator.

In addition, ONS reported that real estate prices in the United Kingdom rose by 2.5% in December, the smallest increase since July 2013. In London, prices fell for the sixth consecutive month, down 0.6% year-on-year.