UK inflation eases more than expected in January

UK consumer price inflation eased more than expected in January, according to figures released on Wednesday by the Office for National Statistics.

The annual rate of CPI fell to 10.1.% in January from 10.5% in December, coming in below analysts' expectations of 10.3%.

This was the third drop in three months, after CPI hit a 41-year high of 11.1% in October 2022.

The ONS said the largest downward contribution came from transport - particularly passenger transport and motor fuels - and restaurants and hotels, helping to offset rising prices in alcoholic beverages and tobacco.

The figures showed that fuel price inflation fell to 7.7% in January from 11.5% the month before, while food inflation remained high, at 16.7% compared to 16.8% in December.

Meanwhile, core CPI came in at 5.8%, down from 6.3% in December and versus expectations of 6.2%.

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."

Capital Economics said: "Overall, the message for the Bank of England from today’s inflation release was clear: disinflationary pressures are building and broadening. This suggests that the end of the Bank of England’s tightening cycle just got a bit closer."