Inflation rate remains steady at 3%
THE inflation rate unexpectedly remained steady at 3 per cent in January, keeping the pressure on the Bank of England to hike interest rates as early as May.
Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) rate of inflation was unchanged in January from the 3 per cent in December, but still lower than the 3.1 per cent peak recorded in November.
Economists had predicted a drop to 2.9 per cent, offering a reprieve for consumers, but downward pressure from motor fuel prices and slowing food price inflation was offset by a shallower fall in leisure costs.
Ben Brettell, a senior economist at Hargreaves Lansdown, said he expected a rise in interest rates "sooner rather than later" and believes this "may well happen in May".
"Indeed Bank of England policymakers said last week they'll try and bring inflation back to target more quickly than previously expected, which means rates could rise faster and further than anticipated."
The lion's share of the downward pressure on inflation came from motor fuel prices, according to ONS senior statistician James Tucker.
"Headline inflation was unchanged with petrol prices rising by less than this time last year," he said.
Petrol prices rose by 1.1p per litre on the month to 121p per litre, while diesel rose 1p to 124.5p per litre.
Food price inflation also appeared to be slowing - having risen strongly since mid-2016 - edging down 0.1 per cent on the month amid larger falls in the cost of meat, oils, milk, cheese and eggs.
"However, the cost of entry to attractions such as zoos and gardens fell more slowly," Mr Tucker noted.
Clothing prices helped to prop up the inflation figure despite having fallen 3.7 per cent month on month, which marked a weaker drop compared to the 4.3 per cent fall during the same period a year earlier.
Airfares - which usually fall after the holidays - also dropped at a slower rate, down just 33.2 per cent month on month, compared to a 36 per cent drop a year earlier.
Tobacco costs, meanwhile, grew faster at 0.4 per cent month on month, which was likely due to the remainder of duty price hikes coming through after being introduced in November.
The Retail Prices Index (RPI), a separate measure of inflation, edged lower to 4 per cent last month from 4.1 per cent in December.
The Consumer Prices Index including owner-occupiers' housing costs (CPIH) - the ONS' preferred measure of inflation - held steady at 2.7 per cent in January, unchanged from the month before.