Inflation in the United Kingdom stayed below the 2 percent target set by the Bank of England for January. This has led to investors predicting a reduction in interest rates. Inflation was popularly expected to touch at least 2.1 percent. Indications that consumer spending may not rebound sufficiently enough to raise growth from a 13-year low is more reason to believe a cut in interest rates may be on the anvil.

Prices dropped 0.5 percent for the same period with furniture and household equipment leading the way. Clothing and footwear followed close behind with a fall of 4.1 percent. Inflation would have been lower if energy and transport prices had not soared. Cost of transportation increased 0.5 percent. Bloomberg reports:

“The figures continue the recent run of reports suggesting that underlying inflationary pressures remain muted,” said Nick Kounis, an economist at Fortis Bank in Amsterdam. “They suggest the bank does have room to cut rates if growth disappoints going forward.”