UK inflation unexpectedly jumps to 3%, reaching a 10-month high in Jan

British inflation sped up by more than expected to hit a 10-month high of 3.0 per cent in January and it is likely to rise further soon, testing the Bank of England's confidence that price pressures are on a downward path over the longer term. 

Economists polled by Reuters had expected a headline inflation reading of 2.8 per cent, pushed up from December's 2.5 per cent rate by factors including an increase in a cap on bus fares and a tax hit to private school fees by the government of Prime Minister Keir Starmer.

The BoE had also forecast a January inflation rate of 2.8 per cent. 

The central bank expects consumer price inflation to peak at 3.7 per cent in the third quarter of this year, driven mostly by higher energy costs and regulated tariffs for items such as domestic water supply. 

But Governor Andrew Bailey and his colleagues say a slowdown in the jobs market is likely to keep a lid on higher wage demands this year after an acceleration in late 2024, limiting the risk of a build-up of inflation pressure. 

Sterling rose after the figures were published before quickly settling back to its pre-release level. 

Services inflation - a key gauge of price pressures for the central bank - stood at 5.0 per cent in January compared with 4.4 per cent in December, the ONS said. The economists polled by Reuters and the BoE had forecast it would pick up by more to 5.2 per cent. 

Core inflation, which excludes energy, food, alcohol and tobacco prices, rose to 3.7 per cent from 3.2 per cent. The Reuters poll had pointed to a reading of 3.7 per cent.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)