Catenaa, Wednesday, February 19, 2025 – UK inflation rose to a more-than-expected 10-month high in January, official statistics said on Wednesday, diminishing hopes for low interest rates and highlighting challenges to the Bank of England.
The Office for National Statistics said inflation, said inflation as measured by the consumer prices index, rose to 3% in the year to January, up from the equivalent 2.5% rate the month before, more than the expected 2.8% forecasted by economists poll by Reuters.
The spike, which took inflation further above the Bank of England’s target of 2%, was largely due to increases in airfares, food costs and private school fees after the VAT imposition by the new Labour government.
Earlier this month, the Bank of England said that price pressures were on a bumpy path as it forecasted inflation to rise to 3.7% by mid-2025, propelled by higher global energy costs. The central bank said it expected inflation to later fall back to around its 2% target.
The bank cut its main interest rate by 0.25 percentage points to 4.50%, the third reduction in six months, as the 2025 growth forecast for the UK cut in half to 0.75%.
Figures released on Tuesday showed UK wage growth excluding bonuses accelerated to an annual rate of 5.9% in the three months to December, but economic growth has been weak, with official data last week showing a marginal expansion of 0.1% in the three months to December, following the stagnation of the previous quarter.
Analysts expect inflation will rise further in the coming months due to higher domestic energy bills and start the downward trend in the second half of the year, which will give -policymakers room to cut interest rates again — but maybe not as many times as previously thought.
