THE UK’s rate of inflation remained at 4% in January in a blow for household budgets.
The annual rate at which prices are rising remained at the same level last month, figures from the Office for National Statistics (ONS) show.
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It comes after the rate of inflation rose unexpectedly to 4% at the end of last year.
It was the first time it had increased since February 2023 and has come as a surprise to many economists.
The latest figures show prices are rising at the same rate as the month before.
But many economists were forecasting that inflation would rise again.
Inflation is a measure of how the price of goods and services has changed over the past year.
The ONS said food prices fell on a monthly basis for the first time since September 2021, and the largest downward push on inflation came from furniture and household goods.
Grant Fitzner, chief economist at the ONS, 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 in May.”
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Ofgem’s energy price cap rose from £1,834 to £1,928 on January 1.
It means the average household will now see their annual bill increase by £94.
Ofgem will review its price cap again on January 23 for the period from April 1 to June 30.
Inflation eased throughout 2023, down from the eye-watering 11.1% seen in October 2022, which was driven by soaring gas and electricity prices.
But the rate is still higher than the Bank of England‘s (BoE) target rate of 2%.
The Bank hikes interest rates in a bid to control inflation, pushing up borrowing costs for millions of homeowners.
In January it kept interest rates unchanged at 5.25% following the recent drop in the inflation rate.
Chancellor Jeremy 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.”
What it means for your money
High inflation means the cost of everyday essentials, like food and energy are rising, meaning your money doesn’t go as far.
Flat inflation will come as a blow for mortgage holders and prospective buyers waiting on tenterhooks for interest rate cuts to soften the blow from high mortgage rates.
Alice Haine, personal finance analyst at Bestinvest said: “Many households will have started 2024 feeling financially squeezed with pandemic savings used up and significantly higher living costs compared to just a few years ago.
“Once again, the uncertain economic climate signals that spending should remain constrained and emergency funds kept topped up to ensure households survive any further financial shocks.”
Alice added that a small fall in food inflation will come as a small relief to struggling households.
She said: “Food inflation continued to retreat – edging down to 6.9% from 8% in December – a reflection of supermarket price wars as major players ramp up loyalty scheme discounts to win market share.”
Meanwhile, the latest figure may also be a blow for mortgage holders and prospective buyers desperately hoping for interest rate cuts.
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Mortgage rate cuts were being cut at the beginning of the year when lenders battled it out for business.
But the market is more mixed now with some lenders upping mortgage rates over the past week as they react to the turbulent swap rate market, which can determine fixed-rate pricing.
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