- Inflation steady at 4%
- Food prices drop slightly
- Interest rate cuts expected
The Bank of England, which has been increasing interest rates to reduce inflation to the target rate of 2%, is likely viewing this as a positive development.
Inflation has remained at 4%, official data shows, despite economists’ predictions of an increase.
In January, the consumer price index (CPI) was 4%, according to the Office for National Statistics (ONS), the same as December and below economists‘ expectations, including those of the Bank of England.
Contrary to the central bank’s anticipated 4.1% increase, economists surveyed by Reuters expected a 4.2% rise.
The cost of used cars and an increase in the energy price cap contributed to inflationary pressure.
However, the first monthly decline in food prices in over two years kept the CPI steady.
From December to January, food prices fell by 0.4%, leading to an overall food inflation rate of 8%. In March last year, food inflation peaked at 19.2%, the highest in 45 years.
The ONS also noted a decrease in the cost of furniture and household goods.
The Bank of England, raising interest rates to curb inflation, likely sees this as encouraging.
The Bank’s Monetary Policy Committee also noted core inflation, which excludes volatile energy and food prices, remained at 5.1%, unchanged and below expectations.
Another report before their March meeting will inform their next interest rate decision.
Markets now expect interest rates to decrease to 5% in June, 4.75% in September, and 4.5% in December.
Chancellor Jeremy Hunt said, “Though inflation doesn’t fall in a straight line, the strategy is working; significant progress has been made from 11%, with the Bank of England expecting it to reach 2% within months.”
