Inflation eases as fuel costs and air fares drop but rate stays in double figures

At 10.1% in January, households are still in the icy grip of double-digit inflation - as Chris Choi reports

The UK's inflation rate fell to 10.1% in January from 10.5% in December, the Office for National Statistics (ONS) said, as lower air fares and fuel costs helped slow rises in the cost of living. The sharp drop in Consumer Prices Index (CPI) inflation in December was a bigger-than-expected fall, with most economists expecting a drop to 10.3% last month.

It was largely due to the price of fuel and cost of restaurants and hotels slowing, according to the ONS, which published the data, and keeps regular track of the price changes of hundreds of everyday items.

Inflation - which still remains near a 40-year high - is the rate at which prices are rising.

Which items have got cheaper - and which have risen in prise?

More expensive:

• Alcohol and tobacco

• Cost of goods leaving factories

• Owner occupiers’ housing costs - the costs of housing services associated with owning, maintaining and living a house - rose by 8.8% in the year to January 2023, down from 9.2% in December 2022

Cheaper:

• Air and coach travel

• Petrol and diesel

• Restaurant, cafe and takeaways

• Cost of furniture (decreased as retailers put on January sales)

• Crude oil, electricity and petroleum prices

Grant Fitzner, chief economist for the ONS, said: “Although still at a high level, inflation eased again in January. 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. “The cost of furniture decreased by more than this time last year, in line with traditional New Year discounting. These were offset by rising prices for alcohol and tobacco, following on from seasonal price cuts in December and a more subdued rise at the same time last year."

Chancellor Jeremy Hunt said the fight to reduce inflation is “far from over” as it remained in double figures in January. He said: “While any fall in inflation is welcome, the fight is far from over. High inflation strangles growth and causes pain for families and businesses – that’s why we must stick to the plan halve inflation this year, reduce debt and grow the economy.”

Although one of Prime Minister Rishi Sunak's pledges is to halve inflation, many economists predicted this will happen naturally, as the cost of energy starts to come down.

Shadow chancellor Rachel Reeves said families would feel no better off following 13 years of Conservative government and repeated Labour’s call for a windfall tax on oil and gas companies to ease bills.

She said that struggling households will be hit further when energy prices rise in April. “Labour would be bringing in a proper windfall tax on oil and gas giants now to stop energy bills going up in April," the shadow chancellor said in response to the new ONS figures," Ms Reeves said. “Our long-term plan to sprint to clean power and insulate 19 million homes will keep bills low for the future too, and get our economy growing.”

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