Inflation holds at 4 per cent in January

Britain’s annual inflation rate remained unchanged in January from the previous month, confounding expectations for an acceleration, official data showed on Wednesday.

The Consumer Prices Index (CPI) stood at 4 per cent last month, the Office for National Statistics (ONS) said in a statement. That was double the Bank of England’s target and beat expectations of an increase to 4.2 per cent.

The rate had unexpectedly picked up in December to 4 per cent from 3.9 per cent.

The ONS added on Wednesday that food prices fell on a monthly basis for the first time since September 2002, and the largest downward push on inflation came from furniture and household goods.

However, energy prices advanced more sharply than the same month a year earlier.

“The price of gas and electricity rose at a higher rate than this time last year due to the increase in the energy price cap, while the cost of second-hand cars went up for the first time since May,” said ONS chief economist Grant Fitzner.

“Offsetting these, prices of furniture and household goods decreased by more than a year ago and food prices fell on the month for the first time in over two years.”

Chancellor Jeremy Hunt said in reaction that inflation was nevertheless on a downward trend.

“Inflation never falls in a perfect straight line, but the plan is working,” said Hunt.

“We have made huge progress in bringing inflation down from 11 per cent, and the Bank of England forecast that it will fall to around 2 percent in a matter of months.”