Lower inflation doesn't mean prices are fallingpublished at 08:57 Greenwich Mean Time 14 February 2024

08:57 GMT 14 February 2024

Michael Race
Business reporter

While 4% might not seem like a big number, it's double the Bank of England's inflation target of 2%.

The UK's inflation problems have been caused by three "shocks", according to the Bank of England - Covid, the Ukraine war, and domestic worker shortages.

These three factors led to inflation hitting 11.1% in October 2022, the highest rate in 40 years.

The rate has fallen since then, but lower inflation doesn't mean prices are falling - just that they are rising less quickly.

So while there was no rise in today's figure from last month, things will continue to cost more than they did before.

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Sir Charlie Bean, former deputy governor of the Bank of England, has been answering this question (among others) over on Radio 4's Today programme.

The upshot - "probably not a lot", he says.

What's more informative to the Bank are yesterday's figures on the labour market, Bean explains, which showed pay growth is still running in excess of 6%. Chancellor Jeremy Hunt described this on Tuesday as "good news".

But the number is "around two or three percentage points higher than is what's really consistent with meeting the [2%] inflation target", Bean says, adding:

Sam Hancock
Live reporter

If you're just waking up or joining us here on this page, you'll see that the UK's inflation rate for January has been announced - and it's remained the same as last month at 4%.

Here's what we know so far:

• Inflation stayed at 4% and core inflation (which excludes the price of energy, food, alcohol and tobacco) remained at 5.1% in January, according to the latest Office for National Statistics (ONS) data
• Forecasters had expected a slight rise, but the decreasing cost of things like furniture and non-alcoholic drink meant rising housing costs didn't have as severe of an effect as anticipated
• A chief economist at the ONS has also highlighted the fact there's been a drop in monthly food prices for the first time since September 2021 - "a good sign", Grant Fitzner says, which is due to the falling cost of products including cream crackers and chocolate biscuits
• Despite there being no rise in inflation today, the government and Bank of England have a target rate of 2%, which Chancellor Jeremy Hunt acknowledges will be the point at which families really feel "relief" from the cost of living
• Labour say the Tories are failing to fix the economy "because they're the reason it's broken"

We're continuing to hear reaction to this morning's figures. Grant Fitzner is the Office for National Statistics (ONS)'s chief economist - he describes this morning's figures as a "mixed bag" and highlights the monthly drop in food prices - of 0.4% - for the first time since September 2021.

"We have seen further falls in food and non-alcoholic beverage," he tells BBC Radio 4's Today programme. "Food prices have seen their first monthly fall for over two years, so that's a good sign."

According to the ONS, this has been influenced by the cost of bread and cereals, cream crackers and chocolate biscuits falling.

Also, while food and non-alcoholic beverage prices are still 7% higher than a year ago, the category saw the slowest rate of increase since April 2022, the ONS says.

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Here's BBC Breakfast's Nina Warhurst explaining what an unchanged inflation rate of 4% means.

"Something that cost you £10 in January last year costs you £10.40 last month," she says.

Watch the clip in full below:

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Let's dig into the figures a bit more to find out why core inflation stayed the same, at 5.1%. Remember this number excludes the price of energy, food, alcohol and tobacco.

Goods in this measure rose by 1.8% in the 12 months to January, down from 1.9% in December. The biggest contributors to this were items including processed food and non-alcoholic drink.

Meanwhile, services in this index rose by 6.5% in the 12 months to January, up from 6.4% in December.

The biggest movement was in housing services, which includes rent, repairs, sewerage collection, house contents insurance, repair of household appliances and council tax.

Because goods and services each saw a change of 0.1% in opposite directions, the figure stayed the same in December and January.

Rate cuts still several months offpublished at 07:46 Greenwich Mean Time 14 February 2024

07:46 GMT 14 February 2024

Dharshini David
Chief economics correspondent

A rise in the energy price cap meant that policymakers were braced for the decline in inflation to have halted in January.

But the fact, overall, that inflation didn’t rise, as some had expected, is a sign that the 14 rate rises over the last couple of years are impacting in other areas.

There was particularly deep discounting in areas such as clothing and furniture, perhaps as retailers scrambled to clear shelves after disappointing sales in the run up to Christmas. That prevented what’s known as core inflation, which includes many non-essentials, rising.

But what the interest rate setters at the Bank of England watch particularly closely is services inflation, which includes the likes of hotels and restaurant meals.

That ticked up, and with figures yesterday showing wage growth slowing by less than expected, many analysts expect the first rate cut to be several months off - with some at the Bank concerned that leaving more money in pockets could risk reigniting inflation.

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It's worth remembering that while inflation has remained the same this month as it was in December, prices are still rising - at a rate of 4%.

Shadow chancellor Rachel Reeves has made that very point in her response to this morning's figures, saying that after 14 years of back-to-back Conservative governments, "working people are worse off".

According to the Office for National Statistics (ONS), the annual rate was unchanged as a result of prices falling by 0.6% on the month, the same rate as it was between December and January a year earlier.

The largest upward contribution to the monthly change in annual rates came from housing and household services, such as higher gas and electricity charges.

Offsetting these were furniture and household goods, and food and non-alcoholic beverages - where the largest downward contribution came from.

All of these factors combined meant inflation remained unchanged at 4%.

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We're starting to get reaction now to the latest inflation figures - up first is Chancellor Jeremy Hunt.

He says:

Hunt's due to speak to reporters shortly - we'll let you know if he says anything else.

We're still combing through the latest UK inflation figures, and bringing you the highlights.

One thing they show is that core inflation has stayed at 5.1% in January. This number excludes the price of energy, food, alcohol and tobacco so it is a closer indicator of how fast prices are rising in goods and services.

When the Bank of England is weighing up whether to raise or lower interest rates, it considers core inflation as well as the headline CPI figure (the 4% number that was announced at 07:00 GMT).

To give you some context, last June and July core inflation reached the highest level since 1992 - 6.9%.

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We've just heard from the Office for National Statistics (ONS) that inflation in January remained at 4%, the same as it was in December.

Forecasters had expected a slight rise.

Stay with us for some analysis - including a look at what this means for you.

Lora Jones
Business reporter

Image source, .

Just before we get the latest inflation figures, let's cast our minds back to yesterday when new data showed that wage growth had slowed again but was still outpacing inflation.

Pay, excluding bonuses, grew by 6.2% in the last three months of 2023 compared with the same period a year before, the figures from the Office for National Statistics (ONS) revealed.

After taking price rises into account, pay went up by 1.9%.

But the statistics watchdog has said it could not guarantee the reliability of jobs market data.

The ONS is currently updating how it gathers information about employment, but this will not be fully in place until September.

• Read more here

Raphael Sheridan
Cost of living producer

Throughout our coverage this morning, we'll hear from business owners who are affected by rising - or decreasing - inflation.

Elizabeth Marshall has been running Daisy Chain Flowers, in Warrington, for 10 years - importing her stock from the Netherlands.

Business in recent months has been very tough, but she’s hoping it'll pick up during key trading periods such as Valentine’s Day (today) and Mother’s Day (10 March).

"People just don’t have the funds anymore - they don’t seem to be able to spend like they used to," she tells me.

"Flowers are a luxury, and everything since Brexit has doubled in price, more or less."

She’s finding that her customers are generally buying smaller bouquets. And tulips, which are cheaper than the traditional roses, seem to be the flower of choice for Valentine’s Day this year.

Dharshini David
Chief economics correspondent

Image source, Getty Images

Rising bills have made it a challenging couple of years - and these figures will be a reminder that this inflation episode isn’t over yet.

The headline rate of inflation is likely to have risen a bit above 4% in January, thanks to an increase in the domestic energy price cap and a few rogue falls in items like airfares last year (inflation compares price movements with a year ago).

But interest rate setters at the Bank of England are braced for this - and also for a drop in the price cap in April to drive inflation to below the 2% target then.

It’s inflation in services, though, like haircuts, phone tariffs and hotel stays, for example - and wage growth - that they’re focussing on.

They've been easing more slowly than some would like - experts worry a rate cut that puts money in pockets may risk reigniting inflation. It’s for that reason they have signalled that lower rates are likely to be several months away.

Inflation is a key measure of the cost of living - and an indicator of how the economy's doing.

The Bank of England’s target for inflation is 2% - set by the government - and it’s gradually been coming down from its peak of 11.1% in October 2022.

Last time it went up slightly from 3.9% in the year to November, to 4% in December. Economists are expecting January’s figure to show another slight jump.

As soon as the figures come out at 07:00 GMT, we’ll let you know. Plus our experts will be on hand to unpick what the numbers tell us. Here's a reminder of what December's looked like:

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Image source, EPA

Inflation measures how quickly prices are rising (or very occasionally falling) for goods and services.

And a series of shocks to the economy over recent years has caused high inflation, the Bank of England says.

First, the Covid pandemic pushed prices up as more people bought goods - but there were problems getting enough of the goods, particularly with importing them from abroad.

Second, the war in Ukraine led to large increases in the price of gas and food.

Then, a big fall in the number of people available to work meant employers began offering higher wages to job applicants, with many businesses increasing their prices to cover these costs.

• Read more here

Jennifer Meierhans
Business reporter

Good morning and thanks for joining us while we wait to find out the latest figures showing the rate of inflation in the UK.

They will tell us the pace at which overall prices for goods and services are rising. The main inflation figure is currently at 4%.

Economists are expecting a slight rise in January’s figure, for the second month in a row, but we’ll know for sure when the figure’s released at 07:00 GMT.

Stay with us until then, and beyond, for live updates and analysis.