The rate of inflation remained unchanged at 4% last month despite economists forecasting it would rise, the UK’s Office for National Statistics (ONS) said.
The ONS said food prices fell on a monthly basis for the first time since September 2021, and the largest downward push on the consumer price index (CPI) came from furniture and household goods.
However, inflation still remains well above the Bank of England’s 2% target.
CPI including owner occupiers’ housing costs (CPIH) rose by 4.2% in the 12 months to January 2024, the same rate as in December 2023.
Wage data published on Tuesday from HMRC suggests the median monthly pay for PAYE (pay as your earn) employees in Northern Ireland increased by 4.6% to £2,130 over the same period.
Despite the annual increase, HMRC’s data showed the average monthly wage fell by 0.4% between December and January.
While food and non-alcoholic beverage prices are still 7% higher than a year ago, the category saw the slowest rate of increase since April 2022.
It means the annual rate has eased for the 10th consecutive month, from a recent high of 19.2% in March 2023, which was the highest annual rate seen for over 45 years.
On a monthly basis, food and non-alcoholic beverage prices eased by 0.4% between December and January.
Most of this drop was down to a 1.3% decrease in bread and cereal prices - the largest in that category since May 2021.
The ONS said seven out of 11 types of food and non-alcoholic beverages it tracks put downward pressure on the inflation figure last month.
Despite the most recent fall, food and non-alcoholic beverages are around 25% more expensive than they were in January 2022. In the entire decade before that, prices only rose around 10%.
The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services (principally higher gas and electricity charges), while the largest downward contribution came from furniture and household goods, and food and non-alcoholic beverages.
Core CPIH (excluding energy, food, alcohol and tobacco) rose by 5.1% in the 12 months to January 2024, down from 5.2% in December 2023.
Commenting on the latest CPI data, ONS chief economist Grant Fitzner said: “Inflation was unchanged in January, reflecting counteracting effects within the basket of goods and services.
“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.
“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.
“All of these factors combined resulted in no change to the headline rate this month.”
Economists’ thoughts immediately turned to what this could mean for the Bank of England’s decisions in the months ahead.
The Bank had forecast that inflation would be 4.1% last month, so it might conclude that its measures to combat inflation are working better than previously thought. Interest rates are currently at their highest levels in 16 years in order to keep a lid on runaway inflation.
So the surprise figures on Wednesday increase the likelihood of the Bank cutting interest rates sometime in the first half of this year, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“We continue to think that CPI outturns over the coming months will convince the (Bank’s Monetary Policy Committee) in the second quarter that monetary policy does not need to be quite as ‘restrictive’ as it is currently, though it looks like a toss-up whether the committee will opt to cut Bank rate for the first time in May or June,” he said.
