Inflation falls slightly to 10.1%

Latest Office for National Statistics (ONS) data has shown that price rises in the UK slowed for a third month in a row as inflation fell to 10.1% in the year to January from 10.5% in December.

The drop was largely due to the price of fuel and cost of restaurants and hotels slowing. This was also offset by rising prices of alcohol and tobacco.

Food inflation also remained high at 16.7% in the year to January and is one of the main drivers fuelling overall inflation, along with energy bills.

Commenting on today’s inflation figures for January, ONS Chief Economist Grant Fitzner said “Although still at a high level, inflation eased again in January. This was driven by the price of air and coach travel dropping back after last month’s steep rise. Petrol prices continue to fall and there was a dip in restaurant, café and takeaway prices. The cost of furniture decreased by more than this time last year, in line with traditional New Year discounting.”

“These were offset by rising prices for alcohol and tobacco, following on from seasonal price cuts in December and a more subdued rise at the same time last year.
There are further indications that costs facing businesses are rising more slowly, driven by falls in crude oil, electricity and petroleum prices. However, business prices remain high overall, particularly for steel and food products.”

Jane Tully, Director of External Affairs and Partnerships at the Money Advice Trust said “Today’s inflation figures show the cost of living crisis is far from over as prices continue to remain high. With council tax and energy bill increases just around the corner, the situation is only going to get more difficult for many more people whose budgets simply won’t stretch any further.”

“The Government needs to reconsider the planned energy bill rise in April, or more people will be at risk of falling into fuel poverty. I would urge anyone worried about their finances to contact a free, independent service like National Debtline as soon as possible. Our advisers will be able to take you through your options and next steps.”

Alastair Douglas, CEO of TotallyMoney said “Although figures show private sector wages have grown at a faster rate than expected, they still lag behind inflation — meaning that in real terms, people are worse off.”

“A slight drop in inflation doesn’t give cause to celebrate, and people won’t suddenly find that the cost of this week’s shop is any cheaper than last week’s. In addition, if the government chooses not to intervene, a new, higher energy price cap is just around the corner.”

“Meanwhile, interest rates are continuing to hammer homeowners, and they’ve not yet peaked. Around 4 million owner-occupied mortgages are expected to increase this year, putting 750,000 households at risk of defaulting.”

“Support is needed, and if people can’t get that from the government, it’s likely they’ll turn to borrowing. Protecting customers from unregulated and/or high cost lending is essential — as is providing adequate support and flexibility to those struggling to manage their money.”

Simon Webb, Managing Director of Capital Markets and Finance at LiveMore, said “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.”