Looking ahead, rising gas and electricity bills could keep inflation close to current levels for the next few months. But we expect further falls in core inflation and fading energy effects to push the headline rate well below target in the second half of the year.
We still expect that the consumer slowdown will prompt more interest rate cuts,
While the stronger-than-expected rise in British GDP put a further dent in the prospects of an interest rate cut in February, we still expect the combination of sluggish growth and falling inflation this year to prompt a modest loosening of monetary policy.
A dovish Inflation Report tomorrow and soft retail sales on Thursday could open the door to a March rate cut.
A very weak report, casting doubt on the Monetary Policy Committee's assumption that household spending will grow in line with its long-term average over the next three years and boosting the chances of a rate cut.