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UK inflation falls to 10.1% in January, less than expected
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Core, services inflation - watched by BoE - slow sharply
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Sterling drops as investors rein in bets on BoE rate hikes
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Low-income Britons still struggling with living costs
(Adds details, recasts)
By Andy Bruce and William Schomberg
LONDON, Feb 15 (Reuters) - British inflation fell by
more than expected in January and there were signs of cooling
price pressure in parts of the economy watched closely by the
Bank of England, adding to signs that further hefty interest
rate hikes are unlikely.
Annual consumer price inflation (CPI) cooled to 10.1% last
month, the lowest reading since September, the Office for
National Statistics (ONS) said on Wednesday.
Economists polled by Reuters had forecast that the annual
CPI rate would drop to 10.3% in January, moving further away
from October's 41-year high of 11.1% but continuing to squeeze
households' living standards.
Despite the fall, inflation remains higher than in the
United States or euro zone, and many forecasters think it will
stay higher as a result of Britain's acute labour shortages and
other constraints on the economy such as Brexit.
British core CPI - which excludes energy, food, alcohol and
tobacco - fell to 5.8% in January from December's 6.3%.
Sterling fell against the U.S. dollar and the euro after the
data. British government bond prices rose sharply as investors
ruled out the chance that the BoE will need to raise interest
rates in March by another 0.5 percentage points. Most expect a
quarter-of-a-percentage-point raise next month.
Earlier this month, the BoE said it saw signs that the
surge in consumer prices had turned a corner and it suggested it
was close to ending its run of interest rate hikes.
Prices of services, which are also in the BoE's spotlight,
slowed their rise in January, increasing by an annual 6.0%
compared with 6.8% in December.
"The Bank of England will be pleased to see that services
inflation is starting to subside. They will also be reassured by
the latest data indicating that private sector wage growth is
easing," said Jake Finney, an economist at PwC.
Data on Tuesday showed strong annual increases in wages but
slowing growth over the most recent months.
Finney said he still expected the BoE to raise interest
rates by another 0.25 percentage points in March, as do most
economists polled by Reuters.
POOREST HIT HARDEST
Finance minister Jeremy Hunt said the government would not
relax its guard.
"While any fall in inflation is welcome, the fight is far
from over," he said.
The ONS said transport and hospitality prices helped to drag
down inflation last month.
Economists said the numbers added to signs that inflation
was on course to fall further from its peak last year but could
also be heralding the recession expected for Britain's economy
in 2023.
And while the rate of inflation for food and non-alcoholic
drinks slowed to 16.7%, this was barely less than the 45-year
record of 16.8% struck in December, little comfort for
households experiencing a severe cost-of-living squeeze.
ONS estimates for inflation by income group suggested the
poorest suffered inflation rates above 15% in late 2022.
"With energy and food prices remaining stubbornly high,
poorer households continue to face far higher living costs than
richer families," said James Smith, research director at the
Resolution Foundation think-tank.
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Some respite from price rises What's behind the fall in UK inflation? What's behind the fall
in UK inflation? ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Andy Bruce
Editing by William Schomberg and Helen Popper)
