In January 2024, annual inflation remained steady at 4%, with the greatest downward pressure coming from reduced furniture and food prices.

However, the month-on-month consumer price index (CPI) declined to -0.6% in January following December's unexpected 0.4% increase, resulting in a 4% annual decrease.

Core CPI hit an annual rate of 5.1%, slightly below the 5.2% consensus estimate, and saw a monthly decrease of -0.9%, surpassing the -0.8% forecast.

Though the annual rate for goods slowed from 1.9% to 1.8%, the services industry experienced upward price pressures, with the annual rate climbing from 6.4% to 6.5%.

The UK has trailed in reducing inflation despite the Bank of England's (BoE) aggressive interest rate hikes to combat it. While headline CPI has steadily decreased since its peak of 11.1% in October 2022, the country may face a ‘technical recession' in Q4 2024, with initial estimates anticipated on Thursday (15 Feb).

The labour market and wage growth remain robust, posing a challenge for the BoE as it aims to bring inflation back to its 2% target. While the BoE is expected to cut interest rates in the summer, potential tax cuts announced in the Government's Spring Budget statement could influence Monetary Policy Committee members to maintain tighter policies for an extended period.

Suren Thiru, Economics Director at the ICAEW, said:

"Inflation's journey back to the BoE's 2% target should now accelerate, with a sizeable fall in energy bills from April and lower food costs likely to drag inflation noticeably lower by the spring."

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