UK inflation holds steady at 4%, lower than expected

U.K. inflation held steady at 4% year-on-year in January on the back of easing prices for furniture and household goods, food and non-alcoholic beverages, says CNBC.

In their views, MIDF says the UK’s headline inflation rate was unchanged at +4.0%yoy in Jan-24, lower than market expectations of +4.2%yoy while food inflation rate moderated to +7.0%, the lowest since Apr-22.

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Energy prices deflated for 7-consecutive months at -14.9%yoy. Demand-driven inflation was maintained at +5.1%yoy for 3-straight months, lower than market consensus of +5.2%yoy. Against the previous month, headline CPI deflated by -0.6%mom (Dec-23: +0.4%mom), steeper than the market consensus of -0.3%mom.

UK Inflation

Meanwhile, the UK core inflation rate also fell by -0.9%mom (Dec-23: +0.6%mom), deeper than market expectations of -0.8%mom. In addition, producer’s input prices contracted by -3.3%yoy.

It was 8-consecutive months of contraction and steeper than market expectations of -3.0%yoy. On a month-on-month basis, input inflation rate recorded at -0.8%mom, against market expectations of +0.2%mom. Looking ahead, moderating inflationary pressure in the UK may provide a premise for BOE to consider its first rate cut in post-pandemic era.

However, the sticky core UK inflation trend may delay the first cut into later half of the year especially job market remains tight as indicated by low unemployment rate and encouraging labour force participation rate. The jobless rate registered at 1-year low of 3.8% while the participation rate stood at 78.1% in Dec-23, higher than long-term average rate of 76.8%.