UK Inflation Hits 10-Month High On Airfares, Food Prices

(RTTNews) - UK consumer price inflation accelerated to a 10-month high in January on higher airfares and food prices, data from the Office for National Statistics showed on Wednesday.

The consumer price index logged a 3.0 percent rise in January, following December's 2.5 percent increase. This was the fastest growth since March 2024. Prices were forecast to climb 2.8 percent.

On a monthly basis, the CPI fell 0.1 percent, partially reversing the 0.3 percent increase in December. Economists had forecast a monthly decline of 0.3 percent.

Excluding energy, food, alcohol and tobacco, core inflation rose to 3.7 percent from 3.2 percent in the previous month, in line with expectations.

Transport costs and prices of food and non-alcoholic beverages provided the largest upward contribution to the annual inflation in January.

Consumer prices for goods grew at a faster pace of 1.0 percent after a 0.7 percent rise. Likewise, services inflation rose to 5.0 percent from 4.4 percent.

Capital Economics economist Ruth Gregory said inflation will probably rise to around 3.5 percent in the second half of this year.

"We doubt this will prevent the Bank of England from cutting interest rates further," said Gregory. "But it will mean it continues to cut rates only slowly."

ING economist James Smith said the interest rate is likely to fall to 3.25 percent in 2026, which is a fair bit lower than markets are currently pricing.

Earlier this month, the BoE had estimated inflation to peak at 3.7 percent in the third quarter of 2025, owing in part to energy prices before easing again.

The central bank lowered its key interest rate by a quarter-point to 4.50 percent in February, which was the lowest since June 2023.

Separate data from the ONS showed that output prices rebounded in January after falling for four straight months. Output prices gained 0.3 percent annually after a 0.1 percent drop.

At the same time, the annual fall in input prices slowed to 0.1 percent from 1.3 percent in December.

On a monthly basis, output prices grew 0.5 percent, offsetting December's 0.2 percent fall. Meanwhile, input prices advanced 0.8 percent, faster than the 0.2 percent rise a month ago.

House prices in the UK grew 4.6 percent on a yearly basis, the ONS reported today. This was faster than the 3.9 percent rise in November.