- Headline CPI held firm at 4% despite the rise in the energy price cap in January
- Food prices enjoyed their first monthly fall in over two years
- Core inflation holds at 5.1% but services up a touch to 6.5%
Danni Hewson, head of financial analysis at AJ Bell, comments on the latest UK inflation figures:
“The uptick in the energy price cap had us all rushing to take our meter readings whilst nursing new year hangovers, but the increase didn’t push up inflation in the way many had expected.
“Retailers battered by sluggish Christmas sales grabbed their red pens and slashed prices on leftover party frocks and big-ticket items that would appeal to homeowners willing to grab those impressively discounted offers.
“But the best news for all households came from falling food inflation, with prices actually coming down on a month-by-month basis for the first time in more than two years, a factor which helped offset other cost pressures.
“There might be a couple of plot twists, a little added suspense, but simple arithmetic suggests that inflation will continue to edge closer to the Bank of England’s two percent target as the year goes on.
“Market expectation of when interest rate cuts might finally be on the table took a bit of a hit following the latest wage growth data. Today’s more positive news has at least stopped the sneaking suspicion that perhaps those MPC members who have consistently voted for another hike might have been onto something.
“The small percentage factoring in an increase at the next meeting have now jumped back into the hold firm camp, with five percent even optimistically considering that a cut might just be a possibility once again.
“But in real terms prices are still rising and many people are still struggling. The cost of living crisis might not be an everyday headline any more but it’s not over and for those on the lowest incomes it’s likely to remain an issue for many months to come.”
