No News Is Good News, As Inflation Remains Unchanged In January, With Food Prices Falling For The First Time Since September 2021
14th February 2024
CPI inflation in January remained at its December level of 4.0 per cent - slightly weaker than the 4.1 per cent the Bank of England and financial markets had expected. This was despite the Ofgem price cap rising in January, which was offset by falling furniture and food prices, the Resolution Foundation said today (Wednesday 14 February 2024).
The biggest upward pressure on inflation came from the rise in the Ofgem price cap in January, which rose from £1,834 to £1,928 per year.
But this was offset by welcome falls in furniture and food – with the first monthly fall in food prices since September 2021. The latter is particularly good news for lower-income households struggling with the cost of living crisis, who spend a larger proportion of their income on food.
Unchanged inflation in January is likely to prove a pause in the welcome retreat of inflation, as energy prices are expected to put downward pressure on CPI in the coming months.
There was also good news on underlying inflationary pressures with core and services inflation somewhat weaker than expected. Core inflation was at 5.1 per cent, compared to 5.2 per cent expected by the market, and services inflation at 6.5 per cent, compared to the Bank of England's expectation of 6.6 per cent.
The latest data shows that no news can be good news along the bumpy road back to 2 per cent inflation, with the expected rise this month not materialising.
Lalitha Try, Economist at the Resolution Foundation, said, "No news is good news along the bumpy road back to 2 per cent, with inflation flatlining at 4 per cent in January, confounding expectations of a rise.
"Instead, rising energy costs in January were offset by falling furniture and food costs – with food prices falling for the first time since September 2021. This is welcome news for low-income households who spend a higher proportion of their income on food."
