UK inflation remains unchanged at 4% in January

Higher gas, electricity bills are the main upward contributors to the rate, offset by falling prices for furniture, food and non-alcoholic beverages

Confounding expectations for an acceleration, Britain’s annual inflation rate remained unchanged from the previous month in January, official data showed Wednesday.

The Consumer Prices Index (CPI) stood at 4% last month, the Office for National Statistics (ONS) said.

That was double the Bank of England’s target and compared with market expectations of an increase to 4.2%.

Higher gas and electricity bills were the main upward contributors to the rate, offset by falling prices for furniture, food, and non-alcoholic beverages.

“The price of gas and electricity rose at a higher rate than last year due to the increase in the energy price cap, while the cost of second-hand cars went up for the first time since May,” said ONS chief economist Grant Fitzner.

“Offsetting these, furniture and household goods prices decreased by more than a year ago and food prices fell on the month for the first time in over two years.”

Britain’s Conservative finance minister, Jeremy Hunt, said that inflation was nevertheless downward.

“Inflation never falls in a perfectly straight line, but the plan is working,” said Chancellor of the Exchequer Hunt.

“We have made huge progress in bringing inflation down from 11%, and the Bank of England forecast that it will fall to around 2.0% in months.”

The BoE has hiked borrowing costs to the highest level in 16 years to cool U.K. annual inflation.

Inflation has fallen sharply from a 41-year peak of 11.1% in October 2022.

Analysts said Wednesday’s data showed that the central bank could decide to cut its primary interest rate from 5.25% in the coming months.

“The ingredients remain in place… to start cutting interest rates in the next few months,” noted EY analyst Martin Beck, who expects the first reduction in May.

“Overall, the latest inflation data should reassure (policymakers) that the time to start cutting interest rates is approaching,” he added.

Source: AFP

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