· CPI inflation in January hits 1.8%, while CPIH inflation is 1.8% and RPI is 2.7%
· Water, electricity, gas and other fuels the biggest upward pressures
· Savers hit again as inflation rises above most savings rates
Laura Suter, personal finance analyst at investment platform AJ Bell, comments:
“Inflation took a surprise jump to 1.8% in January, up from 1.3% the previous month, putting it at the highest rate since last July. The biggest factors in the rise in inflation were a rise in petrol prices and a smaller than usual drop-off in the price of air travel.
“The rise is another blow to savers, who are continually getting low interest rates on their cash, meaning they fail to even keep pace with rising prices. This will be particularly tough news in the week when the Government-backed savings provider NS&I announced another round of rate cuts for loyal savers.
“Inflation has now been below the Government’s 2% target since August last year, which had been putting further pressure on the Bank to cut interest rates. Such a move was expected by some in January, but only two members of the monetary policy committee voted for a cut, with the rest opting to defer the decision. The jump in inflation this month may lead the Bank to continue its wait-and-see approach before it makes a move on rates.
“The latest wage inflation figures released yesterday show pay is increasing by 3.2%, excluding bonuses, and while this is a drop on the previous tranche of data, it’s still far ahead of inflation. This is key as for so many years inflation has outpaced earnings growth, leaving workers perpetually worse off. That said, the negative effect of so many years of below-inflation pay increases can’t be wiped out in a few short months.
“Policymakers will hope that this positive wage growth translates into greater consumer spending figures, if some households feel flusher. However, many individuals and businesses will be hoping for further help in next month’s Budget, in the form of tax cuts or cost-cutting measures.”
