Yesterday saw the release of the Consumer Price Index (CPI) for the 12 months to the end of January 2016. The Office for National Statistics reported that CPI had risen 0.3% over the period which was in line with consensus forecasts. This represented the highest rate in a year, but delving further into the figures reveals some interesting facts.

The rise in CPI was more to do with the use of an index over a 12 month period, rather than price increases in the underlying goods and services which form the CPI basket. Of the four largest contributors to the upward movement in CPI three of the components were still witnessing price falls. Motor fuels and lubricants saw a fall of 2.6% between December 2015 and January 2016. The fact that this is smaller than the 6.8% fall seen between December 2014 and January 2015, which now drops out of the index calculation, provided uplift to CPI.

The same is also true for food and non-alcoholic beverages, which fell 0.6% between December 2015 and January 2016 compared to 1% between the same two months a year earlier. Clothing and footwear also fell less than between the same two months a year earlier, but still recorded a fall of 3.4% compared to 3.9%.

Although the index is on the rise it still remains some distance from the target of 2%, with the latest Bank of England inflation report suggesting that CPI will still only stand at 1.2% in the first quarter of next year. They will be aware of the imbalance that still remains between inflation within goods compared to in services. The goods inflation index remains negative at -1.5%, an improvement from the -2.1% for the 12 months to the end of December 2015. Services inflation currently stands at an annual rate of 2.3%, although this is down from 2.9% the previous month.

The above data along with core CPI, which excludes food and energy, slowing to 1.2% compared to 1.4%, and wage inflation showing no greater upward pressure at 2% despite unemployment at a decade low of 5.1%, would all appear to suggest the Bank of England have no need to consider an interest rate rise anytime soon.