The Bank of England is unlikely to be alarmed by the pick-up in inflation, our economics editor Larry Elliott explains:
It would come as no surprise to see inflation rise further over the summer. Many consumers are cash-rich after being deprived of spending opportunities, and a lot of businesses are clinging on by their fingertips. The combination of the two is likely to push up prices. Brexit will continue to have a temporary upward effect on inflation.
Rising prices would only prompt a marked change in policy from the Bank of England if there were signs that it was leading to a surge in wage inflation. That doesn’t seem all that probable, given the sharp rise in unemployment over the past year. But the Bank will start to think about how and when to unwind some of the emergency stimulus it has been providing. Negative interest rates will be off the agenda.
Full story: UK inflation rises as price of food and furniture increases
Rising food prices drove up inflation in January during the toughest coronavirus lockdown measures since the first wave of the pandemic, my colleague Richard Partington reports.
The Office for National Statistics said the consumer prices index rose to 0.7% in January – from 0.6% a month earlier – as shops including food retailers and household goods stores pushed up their prices with less discounting this year on items such as beds and settees.
However, there were also widespread January sales as the closure of non-essential shops forced retailers to cut their prices to sell stock where possible, including for clothing and footwear.
Britain’s economy is expected to have plunged into reverse at the start of the year after narrowly escaping a double-dip recession, following the worst annual fall in gross domestic product (GDP) for more than 300 years in 2020.
With business and social life disrupted by the pandemic, inflation has fallen below the Bank of England’s target rate of 2% amid depressed levels of demand for goods and services.
However, analysts said the inflation rate was likely to rise in the coming months, partly because the gauge measuring the annual growth of consumer prices would no longer be compared with pre-pandemic levels. That, and a 9% rise in the household energy price cap, is expected to lift inflation by the summer.
The ONS said the inflation rate was pushed up in January by the rising price of frozen fish fingers, vegetables such as cauliflowers, and premium crisps. The biggest contribution was from furniture retailers and household goods stores, where there was less discounting of leather settees, double beds and fitted sheets.
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Read More: UK inflation rises to 0.7% in January; biggest house price jump since 2014