UK Inflation Remains Steady at 4% in January

UK consumer prices continued to rise last month, with headline inflation holding at 4% year-over-year in January. This was slightly below expectations of a rise to 4.2%.

The monthly rate of inflation even declined a bit, dropping to -0.6% in January after a 0.4% increase in December. Some easing prices for items like furniture, food and household goods helped pull the overall rate lower.

Core Inflation Shows Lingering Pressures

However, core inflation which strips out volatile items remained elevated. The core CPI rate came in at 5.1% year-over-year, topping forecasts of 5.2%. This shows that underlying cost pressures in the UK economy remain strong, especially for services. Wages continue growing rapidly to compete in a tight labor market.

Prices are still rising faster in the UK than other major economies. But officials are hopeful that inflation will continue drifting downward as energy costs ease further and demand cools in the face of interest rate hikes. The Bank of England targets inflation of 2% annually.

Economists will be watching upcoming data closely for signs that cost pressures are finally abating. If wage growth and spending hold up despite higher borrowing costs, it may take longer for UK inflation to return to more normal levels. Policymakers at the central bank have more work to do guiding prices lower.