The biggest monthly fall for gas prices since the 1980s helped drag down United Kingdom inflation to the lowest level in two years in January as the government's energy price cap came into effect.
The main driver for inflation was the new energy price cap on standard variable tariffs recently introduced by energy watchdog Ofgem.
December's growth was much faster than a downwardly revised 0.3 percent year-on-year increase in November, the data showed.
"The further falling back in inflation facilitates the Bank of England maintaining a "wait and see" approach on interest rates until after the United Kingdom leaves the EU", Howard Archer, chief economic adviser to the EY ITEM Club consultancy, said.
Inflation (blue line) plunged to 1.8 per cent in January the lowest rate for two years, official statistics revealed today.
Consumer-price growth reached 2.05 percent in January, well below the Reserve Bank of India's medium term target of 4 percent.
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As well as the sharp decline in energy prices, Whitehall statisticians said the drop in inflation was also fuelled by lower petrol prices and a decline in the cost of hotel rooms.
'That said, sadly it is still the case that many savings accounts are paying less than inflation - particularly older accounts and those held with the high street banks.
"On the downside, we see the most significant support line at 1.1295: we note last month's low, the Fibonacci 61.8% one-day, and the PP one-month Support 1, all substantial lines", he added further.
The Bank of England said this month that United Kingdom economic growth will likely slow further in 2019 given weakening demand from overseas and a period of increased "Brexit uncertainty" that are expected to reduce activity in the UK. Meanwhile, Core CPI, which excludes food and energy costs, is expected to rise 0.2%m/m in January, same as in December, and tick lower to 2.1% y/y rate from 2.2%.
Economists said it facilitated the Bank's "wait and see" approach on interest rate hikes ahead of Britain's departure from the EU.
United Kingdom inflation rose from 0.5% in June 2016 to 3.1% by November 2017 and core inflation increased from 1.4% to a peak of 2.7%. Get 3-5% more currency than your bank would offer by using the services of foreign exchange specialists at RationalFX.