UK inflation remains steady at 4% as food prices fall, beating expectations

Shoppers walk past a large poster outside a supermarket in London, on June 10, 2023.
Shoppers walk past a large poster outside a supermarket in London, on June 10, 2023. Copyright Alastair Grant/Copyright 2023 The AP. All rights reserved
By James Thomas
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Economists had predicted that rising prices would accelerate slightly.

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Inflation in the UK stayed flat at 4% in the 12 months leading up to January, thanks to an easing in prices for furniture, household goods, food and non-alcoholic beverages.

Experts had been expecting a slight increase by about 0.2%, according to reports.

The country's Office for National Statistics (ONS) said that the freeze in the annual inflation rate between December and January was due to prices falling by 0.6% on the month - the same rate as a year prior.

Most notably, prices for food and non-alcoholic beverages saw their first month-on-month fall in more than two years, from an inflation rate of 0.6% to -0.4%, according to the ONS.

Meanwhile, furniture and household goods prices fell from -1.1% to -3.1%, while clothing and footwear costs went from -3.1% to -3.9%.

"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," Danni Hewson, head of financial analysis at AJ Bell, said.

“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," she added.

Experts believe that the figures suggest UK inflation will continue to edge closer to the Bank of England's 2% target, allowing the central bank to consider slashing its 15-year-high interest rate of 5.25%.

The bank's next interest rate decision is due in March.

"In real terms prices are still rising and many people are still struggling," Hewson said. "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."

Chancellor of the Exchequer Jeremy Hunt said in a statement that today's inflation figures show the government's plan "is working".

"We have made huge progress in bringing inflation down from 11%, and the Bank of England forecast that it will fall to around 2% in a matter of months," he said.

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