UK inflation rate unchanged at 4% in January as Jeremy Hunt insists ‘plan is working’ – live

The average UK house price fell by around £4,000 in the 12 months to December 2023, according to official figures.

The typical house price in December 2023 was £285,000, marking a 1.4 per cent decline over 12 months, the Office for National Statistics (ONS) said.

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The prime minister has insisted the “economy has turned the corner” as he convened the first meeting of his 2024 Business Council.

His comments came after figures showed inflation remained unchanged in January at 4 per cent.

Speaking to chief executives in Downing Street on Wednesday morning, Rishi Sunak said: “I’m absolutely determined to make the UK the best place in the world to start to grow and invest in businesses.

“Of course we’re still battling with lots of global headwinds, not least the Red Sea at the moment, but at the start of this year I absolutely believe that the economy has turned the corner and we’re now pointing in the right direction.”

He continued: “Hopefully that’s something that you’re seeing in your businesses, but inflation has been more than halved from 11 per cent down to 4 per cent, mortgage rates are starting to come down.

“Everyone is predicting us to grow this year.”

Large tax cuts in next month’s Budget risk pushing the Bank of England to keep interest rates higher for longer, accountants say.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: “This softer than expected outturn is further evidence that the UK is close to winning its fight against soaring inflation.

“Inflation’s journey back to the Bank of England’s 2 per cent target should now accelerate, with a sizeable fall in energy bills from April and lower food costs likely to drag inflation noticeably lower by the Spring.

“Though core and services inflation remain uncomfortably high, the squeeze from weakening labour demand, slowing wage growth and a struggling economy means they should fall back over this year.

“While interest rates could start falling over the summer, large tax cuts in next month’s budget would risk pushing the Bank of England to keep policy tighter for longer by refuelling concerns over inflation.”

A leading credit agency has said it doesn’t expect the Bank of England to cut interest rates until August despite January’s better-than-expected inflation numbers.

Marion Amiot, senior European economist at S&P Global Ratings, said: “The latest inflation print is another reflection of what is happening in the labour market: a tight labour supply is sustaining high wage growth and thus underlying inflationary pressures, especially in services.

“That said, recent developments will continue to put inflation on a downward path. Aside from easing energy, food and producer prices, falling vacancies and easing wage pressures are offering positive signs for the Bank of England, that tighter financing conditions are cooling labour demand.

“Much remains to be done to get inflation back to target, so we don’t expect any rate cuts until August.”

January’s unchanged inflation figure shows the cost of living crisis “isn’t going away” yet, the Moneysupermarket Group has said.

“With 80 per cent of the population already worried about money and 25 per cent worrying on a daily basis, the news that inflation remains unchanged means millions of families will continue to experience daily money struggles,” Lis Blair, Moneysupermarket Group chief customer officer, said.

“The cost of living crisis isn’t going away, and we shouldn’t underestimate the impact of financial pressures on the nation’s mental health.”

Responding to the latest inflation figures, Unite general secretary Sharon Graham said: “Despite all the talk of the cost of living crisis being over, the truth is that prices are not falling and average wages have not caught up.

“Energy costs are still 80 per cent higher than in 2021. Workers must not be made to pay the price for the government’s failure to tackle the rampant profiteering that has been a key driver of this crisis.”

The Bank had forecast that inflation would be 4.1 per cent last month, so it might conclude that its measures to combat inflation are working better than previously thought.

Interest rates are currently at their highest levels in 16 years in order to keep a lid on rising prices.

So the surprise figures on Thursday increase the likelihood of the Bank cutting interest rates sometime in the first half of this year, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“We continue to think that CPI outturns over the coming months will convince the (Bank’s Monetary Policy Committee) in the second quarter that monetary policy does not need to be quite as ‘restrictive’ as it is currently, though it looks like a toss-up whether the committee will opt to cut Bank rate for the first time in May or June,” he said.

The monthly drop in food prices, of 0.4 per cent, was the first since September 2021, with the cost of bread and cereals, cream crackers and chocolate biscuits falling, the ONS said.

While food and non-alcoholic beverage prices are still 7 per cent higher than a year ago, the category saw the slowest rate of increase since April 2022.

On a monthly basis, food and non-alcoholic beverage prices fell by 0.4 per cent between December and January.

Most of this drop was down to a 1.3 per cent decrease in bread and cereal prices – the largest in that category since May 2021.

Responding to January’s inflation figures Ben Harrison, director of the Work Foundation think tank at Lancaster University, said: “The UK has hit a second minor set-back this year as inflation is struck at 4 per cent, which is unchanged from the previous month, due to higher gas and electricity charges.

“This will present a quandary to Bank of England rate-setters about whether to stick or reduce interest rates as inflation remains double their target.

“And it presents big challenges for workers. Real term pay may have risen this month by 1.4 per cent, but ONS data shows that four in ten adults who pay energy bills are finding it very or somewhat difficult to afford them, and the OBR predicts living standards will be 3.5 per cent lower in 2024-25 than before the pandemic.

“Those in low paid and insecure jobs will be worst impacted by this and among those most vulnerable should inflation remain stuck or if interest rates rise further. This underlines the importance of more action to improve access to better paid, more secure jobs.”

Commenting on the ONS inflation figures Hetal Mehta, head of economic research at St James’s Place, said: “UK inflation moved sideways in January.

“Whilst the uptick that economists were expecting was avoided, it still remains at double the Bank of England’s 2 percent target.

“What will still be concerning the BoE (Bank of England) is the stickiness of services inflation, especially as it comes on the back of strong wage growth.

“But compared to big upside surprise in US inflation yesterday, today’s UK numbers come as slight relief in relative terms.”