UK inflation retreats further, remains above 10%

Inflation

British annual inflation dropped further last month on easing transport costs, official data showed Wednesday, but remains above a historically-high 10 percent.

Inflation around the world is easing after striking the highest levels in decades last year as the invasion of Ukraine by Russia fuelled energy and food prices.

The UK Consumer Prices Index fell to 10.1 percent in January compared with a rate of 10.5 percent in December, the Office for National Statistics (ONS) said in a statement Wednesday.

UK inflation has dropped in recent months from a peak of above 11 percent in October, which was reached also on shortages of supplies of goods and services as economies reopened from Covid lockdowns.

With elevated inflation eroding the value of wages, Britain is facing its biggest strikes by public and private sector workers in more than a decade.

Finance minister Jeremy Hunt welcomed the easing inflation figure but cautioned that "the fight is far from over".

He added in a statement: "High inflation strangles growth and causes pain for families and businesses -- that's why we must stick to the plan (to) halve inflation this year, reduce debt and grow the economy."

Official data last week showed Britain narrowly avoided recession in 2022, but the risk of a prolonged contraction remains for this year according to analysts.

- 'Still at high level' -

Across the Atlantic, rising rent and rebound in gasoline prices helped keep US consumer prices elevated in January, government data showed Tuesday.

The CPI in the United States rose 6.4 percent in January from a year ago. This was a touch below December's figure and the smallest annual increase since October 2021.

But it remains significantly above the Federal Reserve's two percent target, a level sought also by the Bank of England.

In a bid to cool inflation, central banks have raised interest rates several times and by sizeable amounts over the past year, while more hikes are expected.

"Although still at a high level, (UK) inflation eased again in January," noted ONS chief economist Grant Fitzner.

"This was driven by the price of air and coach travel dropping back after last month's steep rise.

"Petrol prices continue to fall and there was a dip in restaurant, cafe and takeaway prices," he added.

Despite the drop to inflation, "prices have settled at a much higher level than two years ago", said David Bharier, head of research at the British Chambers of Commerce.

"Most small firms remain hammered by rising costs from energy, raw materials, interest rates, taxation, and new trade barriers with Europe" in the wake of Brexit, he added.