UK Inflation Weakens To 10.1%

(RTTNews) - UK consumer price inflation eased more than expected in January on lower fuel prices, but the rate remained elevated, squeezing household income and adding more strain on the cost of living.

Consumer prices registered an annual growth of 10.1 percent in January, following the 10.5 percent increase in the previous month, data published by the Office for National Statistics showed Wednesday.

The rate was expected to slow to 10.3 percent. This was also down from a peak of 11.1 percent posted in October.

Core inflation that excludes prices of energy, food, alcoholic beverages and tobacco, eased to 5.8 percent in January from 6.3 percent in the previous month.

The core rate also remained below its recent peak of 6.5 percent in both September and October.

On a monthly basis, consumer prices dropped for the first time in a year in January, down 0.6 percent after rising 0.4 percent each in December and November.

At the February meeting, the Bank of England said inflation has turned the corner. The inflation rate is forecast to fall to around 4 percent towards the end of the year and to hit the 2 percent target in the medium-term.

The bank has raised its key rate over the last ten consecutive rate-setting sessions. In February, the rate was lifted by 50 basis points to 4.00 percent, the highest since 2008.

ONS said the overall slowdown in CPI inflation was mainly driven by transport costs, and restaurants and hotels.

The annual increase in transport cost slowed to 3.4 percent in January, the weakest since February 2021. The main drivers behind the easing were passenger transport services and motor fuels.

Restaurant and hotel prices also contributed to the easing with the price growth slowing to 10.8 percent from 11.4 percent.

These downward movements were partially offset by alcohol and tobacco, where prices increased 5.2 percent, faster than the 3.8 percent gain in December. Another report from the ONS showed that output price inflation weakened to 13.5 percent in January from 14.6 percent in the previous month.

At the same time, input prices logged a double-digit growth of 14.1 percent, but slower than the 16.2 percent increase posted in December.

Month-on-month, output prices gained 0.5 percent, reversing December's 0.8 percent decrease. Input prices slid 0.1 percent, following a 1.1 percent fall a month ago.