Cost of living

Boost for Chancellor as inflation holds steady at 4%

Jeremy Hunt
Inflation news comes ahead of Jeremy Hunt’s budget

Inflation in January remained at 4%, the same as it was in December, lower than expected and tipped to fall again before the next interest rate decision.

Forecasters had expected a slight rise to 4.2% and will be a welcome boost for the Chancellor Jeremy Hunt and Prime Minister Rishi Sunak in the battle to get the cost of living down ahead of the general election.

The consumer prices index figure comes in a fiscally important week for the Government, with the last set of macro-economic indicators before next month’s Budget. GDP figures are due out later in the week.

Mr Hunt said: “Inflation never falls in a perfect straight line, but the plan is working; we have made huge progress in bringing inflation down from 11%, and the Bank of England forecast that it will fall to around 2% in a matter of months.”

The Office for National Statistics said higher gas and electricity charges, following the lifting of the energy price cap, were “upward” pressures on inflation, while the lower cost of furniture, household goods, food and non-alcoholic drink helped keep price growth down.

Following concern at yesterday’s data showing persistent wage growth, the inflation figure eases pressure on the Bank of England to keep interest rates higher for longer to bring inflation back down to its 2% target.

Lower interest rates would raise confidence among consumers and lower the Treasury’s borrowing costs, releasing funds to be injected into the economy.

Economists are now predicting that inflation will fall to 3.4% in February and hit the bank’s 2% target in April.

Figures from the US last night showed that inflation slowed to 3.1% from 3.4%.

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