Inflation declined for the third month in a row in January, offering more evidence that the worst of the cost crisis may be over.
The decline from 10.5 per cent in December to 10.1 per cent last month reflects a gradual easing from the painful 41-year high of 11.1 per cent recorded in October.
But this comes as little relief to households, who still face eye-watering prices for many everyday essentials, with food price inflation hitting a 45-year high of 16.8 per cent in January. happened.
Here we look at the key questions related to the official data.
– Does falling inflation mean prices are going down?
Unfortunately not. While the inflation rate is falling, it only shows that prices are rising more slowly than before.
Overall prices are rising very high, inflation remains in double digits and is still more than five times the government’s target of 2 percent.
Why did inflation come down in January?
national statistics office The (ONS) said the decline in the rate of consumer price index (CPI) inflation was driven by lower airfares and fuel costs.
The decline in passenger fares generally contributed to the decline in inflation, with air tickets seeing the biggest drop.
The data showed that annual inflation in airfares shot up to 44.1 per cent in December, but fell by more than half to 18.4 per cent in January.
Road transport fares such as coach travel also fell sharply, with inflation at 5.7 per cent, down from 11.3 per cent, while bus fares also decreased, largely thanks to the £2 cap on single bus fares, which was introduced in 2019. became effective. england From January 1st.
Motor fuel prices also helped slow the pace of inflation, with average petrol prices falling 5.9pa a liter between December and January to 149.4p a liter last month – the lowest since February 2022.
– Is the worst behind us?
The figures give hope that the peak of inflation has passed. Economists are of the view that the price hike will remain slow in the coming months and throughout 2023.
Petrol prices declined as oil prices slumped on demand concerns amid a global economic slowdown, along with other commodity prices.
Reduction in global supply chain disruption is another factor helping to bring down the prices.
But price rises are not slowing down across the board, with food inflation last month at its highest level since September 1977.
A large number of retailers have recently warned that shop and food prices have not yet peaked.
Despite a sharp fall in wholesale energy prices in recent months, the cost of electricity remains very high.
Added to this, the Government has been reducing its energy support package since April, capping gas and electricity bills at £3,000 a year, up from £2,500 at present.
Businesses will also face cuts in government energy support from the end of March.
– when will it happen Britain Have you started feeling the benefits of low inflation?
The bank is projecting inflation to fall to around 4 percent by the end of this year, while experts expect it to exceed its target of 2 percent in early 2024.
It is hoped that falling global commodity prices will soon begin to moderate food price inflation, although supermarket owners tesco recently said they believe the peak may not occur until mid-2023.
Are wages keeping pace with inflation?
sadly not. The cost crisis is compounded by the fact that wage growth is lagging badly behind price increases.
Official data on Tuesday showed regular pay excluding bonuses rose 6.7 per cent in the three months to December – but fell 3.6 per cent after taking CPI inflation into account.
What does a fall in interest rates mean?
A third straight fall in inflation will undoubtedly encourage the Bank of England, but there is much uncertainty over whether it will finish raising interest rates.
There is speculation it could hike interest rates again in March, by a quarter point to 4.25 per cent from the current 4 per cent, due to fears that rising wages mean inflation may be gripping the economy. .
This will be the 11th consecutive hike.
But many believe the bank is nearing the end of its run of rate hikes, certainly larger increases that have been pushed through in recent months given the stark inflation outlook.