January inflation undershoots Bank of England target

Inflation fell below the Bank of England’s target in January, dragged down by lower energy and fuel prices.

Figures from the Office for National Statistics (ONS) show the Consumer Prices Index (CPI) fell to 1.8% last month from 2.1% in December.

The last time inflation came in at 1.8% was in January 2017.

January inflation missed economists’ expectations and the central bank’s target of 2%.

Sterling held firm after the news, at 1.289 US dollars and 1.138 euros.

Inflation was pulled lower by a decline in electricity, gas and other fuel prices between December and January, which was partially offset by lower air fares.

The main driver for inflation was the new energy price cap on standard variable tariffs recently introduced by energy watchdog Ofgem.

Mike Hardie, head of inflation at the ONS, said: “The fall in inflation is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time last year.

“House prices continued to grow, albeit at the lowest UK annual rate since July 2013 with growth in the North East and London lagging behind Northern Ireland, Wales and the West Midlands.”

At the pumps, motorists had lower fuel costs last month, with petrol down by 2.1p per litre on the month to 119.6p. Diesel also fell by 2.4p to 129.5p.

Clothing and footwear prices had a small downward pull on inflation with prices falling by 1.3% for the year to January.

The Retail Prices Index (RPI), a separate measure of inflation, was 2.5%, down from 2.7% in December.

The CPI including owner-occupiers’ housing costs (CPIH) – the ONS’s preferred measure of inflation – was 1.8% in January, down from 2% in December.