Inflation remained in double digits in January, up 10.1% in the 12 months to January 2023, according to the latest Consumer Price Index.
While that’s down from 10.5% in December it is still significantly higher than the Bank of England’s 2% target.
A drop in travel costs has helped lessen inflation despite a rise of 7.6% in the year to January, but still showing a massive drop from the 18.3% seen in December.
The largest fall came from air travel. In December, the cost of flying soared by 44.1%, the fastest rate since 1989. In January, this declined to 18.4%.
Chancellor Jeremy Hunt said: “While any fall in inflation is welcome, the fight is far from over.
“High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan to halve inflation this year, reduce debt and grow the economy.”
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Adam Oldfield, Phoebus Software’s chief revenue officer:
“All in all the UK economy seems to be defying predictions with GDP up and now inflation easing more quickly than many had thought. Although the percentages are small it is a step in the right direction. Nonethless, we heard only yesterday that real wages are struggling to keep up with inflation, so we have a way to go before that situation changes and people start to feel like they are in pocket rather than out. This will not be helped in the coming months if energy prices increase to the level that we have been told to expect.
“This is a crucial time for both lenders and brokers. Ensuring that existing borrowers have the best deal and that exposed borrowers are getting the best advice and help to try to ensure that the recent small rise in arrears isn’t an increasing trend.
“No doubt the question for many now is, will this drop in inflation be enough for the Bank of England to hold interest rates at their current rate, or will we still see another rise when the MPC next meets in March? As we head into spring, a traditionally more buoyant time for the housing market, this could be key for momentum.”
Simon Webb, managing director of capital markets and finance at LiveMore:
“Although inflation fell slightly in January by 0.4%, it is still in double-digit figures at 10.1%. This creates uncertainty as to whether the Bank base rate will stay at 4% when the Monetary Policy Committee meets next on March 23.”
“The next inflation figures are due the day before the MPC’s announcement in March so if inflation falls further, it may see reasons not to raise the base rate. Two of the MPC members at the last meeting voted against an increase so there is likely to be substantial debate around whether to lift base rate and if so by how much. Intense focus will remain on economic data that emerges over the coming weeks and months.”
