Inflation dips for third consecutive month to 10.1%

On a monthly basis, CPI fell by 0.6% in January.

Related topics:  Finance News,  Inflation
Rozi Jones | Editor, Barcadia Media Limited
15th February 2023
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"At 10.1%, the CPI rate is still touching on a 40-year high causing stress for businesses and consumers alike"

CPI inflation rose by 10.1% in the year to January, down from 10.5% in December, according to the latest ONS statistics.

On a monthly basis, CPI fell by 0.6% in January, compared with a fall of 0.1% in January 2022.

CPIH inflation, which includes homeowners' housing costs, rose by 8.8% annually, down from 9.2% in December 2022.

The largest upward contributions to the annual CPIH inflation rate came from electricity, gas, and other fuels, alongside rising food prices.

The largest downward contribution to the change in both the CPIH and CPI annual inflation rates came from transport, motor fuels, restaurants and hotels.

Core CPIH (excluding energy, food, alcohol and tobacco) fell to 5.3% in the 12 months to January from 5.8% in December 2022.

Mike Owens, senior sales trader at Saxo UK, said: “UK inflation has fallen for a third month in a row which will be welcome news for the Bank of England as it aims to bring the rate back down to the 2% target level. At 10.1%, the CPI rate is still touching on a 40-year high causing stress for businesses and consumers alike, interest rates will almost certainly need to rise again at the bank's next meeting on March 23rd. Inflation is expected to fall as we head through the year as the spike in prices from 2022 passes through. The Government is still committed to halving inflation over the course of the year and it will be particularly positive to see the Core CPI figure which excludes food and energy coming in at 5.8% which is lower than the 6.2% forecast. The pound has weakened against other major currencies, losing around -0.5% versus the US dollar and Euro.”

Simon Webb, managing director of capital markets and finance at LiveMore, commented: “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.”

Derrick Dunne, CEO of YOU Asset Management, added: “The ONS recorded a 0.4% slowdown in CPI inflation for January, led by month-on-month declining fuel prices and falls in the hospitality sector. With 12-month CPI inflation still in double digits, the Bank of England has some way to go until it reaches its 4% prediction for 2023, making another interest rate rise next month still likely.

“It will take time for monetary policy changes to feed through to the economy enough to sufficiently tame CPI, meaning savers and investors can expect inflation to persist for some time. That being said, today’s figures show we are on the right path. All being well, inflation should continue to decline while GDP growth falters and the labour market weakens.

“The Bank has been caught between a rock and a hard place for some time now, trying to temper persistently high inflation, while minimising the impact of more expensive credit and mortgages on households already struggling with high energy costs. Another rate rise is still possible, although at what level remains to be seen."

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