Inflation hits higher-than-expected 3% in January
By Michele Maatouk
Date: Wednesday 19 Feb 2025
(Sharecast News) - The annual rate of consumer price inflation rose to 3% in January from 2.5% the month before, versus expectations for a smaller uptick to 2.8%, according to figures released on Wednesday by the Office for National Statistics.
On a monthly basis, CPI fell 0.1% last month, compared with a 0.6% fall in January 2024.
The ONS said the largest upward contribution to the monthly and annual changes came from transport, and food and non-alcoholic beverages, while the largest downward contribution came from housing and household services.
Core CPI - which excludes energy, food, alcohol and tobacco - was 3.7%, up from 3.2% in December. Meanwhile, services inflation ticked up to 5% from 4.4%.
The figures revealed a rise in private school fees, where prices increased by 12.7% on the month after the government imposed 20% VAT on school fees.
ONS chief economist Grant Fitzner said: "Inflation increased sharply this month to its highest annual rate since March last year.
"The rise was driven by air fares not falling as much as we usually see at this time of year, partly impacted by the timing of flights over Christmas and New Year. This was the weakest January dip since 2020.
"After falling this time last year, the cost of food and non-alcoholic drinks increased, particularly meat, bread and cereals.
"Private school fees were another factor, as new VAT rules meant prices rose nearly 13% this month."
Ruth Gregory, deputy chief UK economist at Capital Economics, said the climb in inflation will be "uncomfortable" for the Bank of England.
"We doubt this will prevent the Bank of England from cutting interest rates further. But it will mean it continues to cut rates only slowly," she said.
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