UK inflation holds steady at 4% in January as lower food prices help offset higher energy costs

abcnews.go.com:

Inflation in the U.K. held steady at 4% in January as lower food prices helped offset an increase in energy costs

LONDON — Inflation in the U.K. held steady at 4% in January as lower food prices helped offset an increase in energy costs, official figures showed Wednesday.

The reading was better than expected as most economists expected inflation to rise modestly to around 4.2%.

The Office for National Statistics said the main downward contribution to the figure was a monthly drop in food prices of 0.4%, which was the first since September 2021.

«This is welcome news for low-income households who spend a higher proportion of their income on food,» said Lalitha Try, economist at the Resolution Foundation think tank.

Though interest rates appear to have peaked, the Bank of England has expressed caution about cutting interest rates too soon as lower borrowing rates may bolster spending and put renewed upward pressure on prices.

The Bank of England has managed to get inflation down from a four-decade high of more than 11%, by raising its main interest rate aggressively from near zero to 5.25% from late 2022 until August last year.

Borrowers will be hoping the next move is to lower the rate and soon. But the bank's last set of forecasts showed inflation remaining above the target for much of this year and next and wage growth — a key driver of prices — running too high for comfort.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said the journey back to the target “should now accelerate," with a sizeable fall in energy bills from April and lower food costs likely.

“While interest rates could start falling over the summer, large tax cuts in next month’s budget would risk pushing