UK inflation holds steady

The UK’s annual inflation rate remained at 4 per cent in January despite rising energy prices and the cost-of-living crisis.

Figures from the Office for National Statistics (ONS) revealed that the expected rise failed to materialise, despite Bank of England predictions of a slight increase while City economists polled by Reuters anticipated a climb of 4.2 per cent increase.

Core inflation, which excludes energy, food, alcohol and tobacco, remained unchanged at 5.1 per cent, while services’ inflation rose to 6.5 per cent in January, up from 6.4 per cent the previous month.

“I absolutely believe that the economy has turned the corner and we’re now pointing in the right direction,” Britain’s PM Rishi Sunak told business leaders during the first meeting of his 2024 Business Council on February 14.

“Hopefully that’s something that you’re seeing in your businesses, but inflation has been more than halved from 11 per cent down to 4 per cent,” he said.

Last month’s better-than-predicted cost of living news is set to be followed by inflation falling to the government’s 2 per cent target by spring.  January was the first time it dipped to this level since July 2021, after which it rose to 11.1 per cent in October 2022 before beginning a gradual decline.

The latest ONS figures could pave the way for a cut in the current 5.25 per cent interest rate, which has risen 14 times between December 2021 and August 2023.  The hoped-for reduction would help to boost personal spending and, in turn, the economy.