UK inflation holds steady at 4.0% in Jan.

British inflation remained at 4.0 per cent in January, defying expectations of an increase, lower than economists’ predictions of 4.2 per cent, Reuters reported, citing official data published on Wednesday.

U.K. inflation held steady on the back of easing prices for furniture and household goods, food and non-alcoholic beverages.

Consumer price inflation, which had been higher in Britain than in other wealthy countries, is expected to decrease in the coming months, potentially leading to a reduction in borrowing costs by the Bank of England (BOE).

Investors are now more likely to bet on the BoE cutting interest rates this year, with a roughly 72 per cent chance of a first reduction in June, compared to a 40 per cent chance before the surprise increase in U.S. inflation on Tuesday.

Martin Beck, chief economic advisor to the EY ITEM Club, stated that the latest inflation data should reassure the Monetary Policy Committee (MPC) that the time to start cutting interest rates is approaching.

Services inflation, an indicator of domestic price pressures, increased to 6.5 per cent compared to 6.4 per cent in December 2023, and down from 7.4 per cent in July 2023, but was not as strong as the BoE had anticipated, according to the report.

Finance minister stated, “inflation never falls in a perfect straight line, but the plan is working. We have made huge progress in bringing inflation down from 11 per cent, and the Bank of England forecasts that it will fall to around 2 per cent in a matter of months.”

Following the release of the inflation data, the pound sterling weakened against the U.S. dollar and the euro.

(1 pound sterling = 1.25 U.S. dollar/ 1.17 euro)