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The
Office for National Statistics said the consumer prices index
was 3% higher in January than the year before, down from 3.4% in
December.
The decline was in line with analysts' expectations and puts
inflation well on the path to the central bank's target of 2%
over the coming months. When keeping its main interest rate on
hold at 3.75% at its last meeting earlier this month, the bank
predicted that inflation would be back at target by April.
The further fall in inflation will provide some relief for the
Labour government, which has seen its poll ratings fall sharply
since it returned to power in July 2024, partly because of
cost-of-living pressures.
”Cutting the cost of living is my number one priority," Treasury
chief Rachel Reeves said Wednesday.
Inflation is set to hit the target in April, largely because of
government action. In her budget last November, Reeves announced
that she would be cutting some taxes to get domestic energy
bills down.
With inflation down, an interest rate reduction in March is now
widely expected. The bigger question in financial markets is how
many further reductions there will be this year.
“Inflation is set to fall further in coming months, falling back
to 2% in the near future, which should open up further rate cuts
later this year,” said Luke Bartholomew, deputy chief economist
at asset management firm Aberdeen.
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